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Summary: Extension of no-action position in 22-16 issued to ensure the continued availability, following Brexit, of no-action positions under certain existing CFTC comparability determinations and exemption orders originally issued by the CFTC for EU entities, while CFTC staff undertakes an analysis of UK law in order to make appropriate recommendations of comparability or exemption to the CFTC.

CFTC LETTER NO. 24-11 NO-ACTION AUGUST 28, 2024

Re: Extended and Revised No-Action Positions in Connection with Certain

Previously Granted Commission Determinations and Exemptions, in

Response to the Withdrawal of the United Kingdom from the European

Union

Introduction

The Division of Market Oversight (“DMO”) and the Market Participants Division

(“MPD”) (together, the “Divisions”) are jointly issuing this letter to amend previously

granted no-action positions related to the withdrawal of the United Kingdom (“UK”) from

the European Union (“EU”), known as “Brexit.” In this letter, the Divisions are extending

time-limited no-action positions taken in CFTC Staff Letter 22-161 in connection with the

following actions (collectively, the “Existing Commission Actions”) of the

Commodity Futures Trading Commission (“CFTC” or “Commission”), in response to

Brexit:

Comparability Determination for the European Union: Certain Entity-Level

Requirements;2

1 CFTC Staff Letter 22-16, Extended and Revised No-Action Positions in Connection with Certain

Previously Granted Commission Determinations and Exemptions, in Response to the Withdrawal of the

United Kingdom from the European Union (December 1, 2022), available at

https://www.cftc.gov/csl/22-16/download (“CFTC Staff Letter 22-16”)

for the European Union: Certain Entity-Level

Requirements;2

1 CFTC Staff Letter 22-16, Extended and Revised No-Action Positions in Connection with Certain

Previously Granted Commission Determinations and Exemptions, in Response to the Withdrawal of the

United Kingdom from the European Union (December 1, 2022), available at

https://www.cftc.gov/csl/22-16/download (“CFTC Staff Letter 22-16”).

2 Comparability Determination for the European Union: Certain Entity-Level Requirements (December

27, 2013), available at

https://www.cftc.gov/sites/default/files/idc/groups/public/@lrfederalregister/documents/file/2013-

30980a.pdf.

U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

www.cftc.gov

Market

Partic

ipants

Division

Amanda L. Olear

Director

Division of Market

Oversight

Vincent McGonagle

Director

Page 2

Comparability Determination for the European Union: Certain Transaction-Level

Requirements;3

Comparability Determination for the European Union: Margin Requirements for

Uncleared Swaps for Swap Dealers and Major Swap Participants (with items 1

and 2, the “EU Comparability Determinations”);4 and

In the Matter of the Exemption of Multilateral Trading Facilities and Organised

Trading Facilities Authorized Within the European Union from the Requirement

to Register with the Commodity Futures Trading Commission as Swap Execution

Facilities (the “Exemptive Order”).5

Additionally, DMO is amending the terms of the DMO no-action positions in CFTC Staff

Letter 22-16 to cover two additional multilateral trading facilities (“MTFs”) authorized

in the UK that are not currently covered by such DMO no-action positions, but are

similarly situated to those UK MTFs and organised trading facilities (“OTFs”) currently

covered by the DMO no-action positions

ve Order”).5

Additionally, DMO is amending the terms of the DMO no-action positions in CFTC Staff

Letter 22-16 to cover two additional multilateral trading facilities (“MTFs”) authorized

in the UK that are not currently covered by such DMO no-action positions, but are

similarly situated to those UK MTFs and organised trading facilities (“OTFs”) currently

covered by the DMO no-action positions. Also, DMO is amending the terms of the DMO

no-action positions in CFTC Letter 22-16 to remove from the scope of those no-action

positions a UK MTF and a UK OTF, as a result of such facilities no longer being authorized

in the UK.

This letter is provided in accordance with the Joint Statement by UK and US Authorities

on Continuity of Derivatives Trading and Clearing Post-Brexit of February 25, 2019.6 It

supersedes CFTC Staff Letter 22-16, and the Divisions’ no-action positions taken in this

letter will become effective immediately upon issuance. No person may rely on CFTC

Staff Letter 22-16 after the issuance of this letter.

II.

Background

3 Comparability Determination for the European Union: Certain Transaction-Level Requirements

(December 27, 2013), available at

https://www.cftc.gov/sites/default/files/idc/groups/public/@lrfederalregister/documents/file/2013-

30981a.pdf.

4 Comparability Determination for the European Union: Margin Requirements for Uncleared Swaps for

Swap Dealers and Major Swap Participants (October 18, 2017), available at

https://www.cftc.gov/sites/default/files/idc/groups/public/@lrfederalregister/documents/file/2017-

22616a.pdf.

5 In the Matter of the Exemption of Multilateral Trading Facilities and Organised Trading Facilities

Authorized Within the European Union from the Requirement to Register with the Commodity Futures

Trading Commission as Swap Execution Facilities (December 8, 2017), available at

https://www.cftc.gov/sites/default/files/idc/groups/public/@requestsandactions/documents/ifdocs/mtf

_otforder12-08-17.pdf

n the Matter of the Exemption of Multilateral Trading Facilities and Organised Trading Facilities

Authorized Within the European Union from the Requirement to Register with the Commodity Futures

Trading Commission as Swap Execution Facilities (December 8, 2017), available at

https://www.cftc.gov/sites/default/files/idc/groups/public/@requestsandactions/documents/ifdocs/mtf

_otforder12-08-17.pdf. See also In the Matter of the Exemption of Multilateral Trading Facilities and

Organised Trading Facilities Authorized Within the European Union from the Requirement to Register

with the Commodity Futures Trading Commission as Swap Execution Facilities: Second Amendment To

Appendix A To Order Of Exemption (July 23, 2020), available at

https://www.cftc.gov/International/ForeignMarketsandProducts/ExemptSEFs.

6 Available at https://www.cftc.gov/PressRoom/PressReleases/7876-19. Pursuant to the Joint Statement,

the Commission committed to extending existing regulatory relief granted by the CFTC to EU firms,

including UK firms, to UK firms at the point of the UK’s withdrawal from the EU.

Page 3

In June 2016, the people of the UK voted by referendum to leave the EU. On March 29,

2017, the UK submitted notification of its intention to withdraw from the EU at the

conclusion of a two-year period pursuant to Article 50 of the Treaty on European

Union.7

In January 2020, the UK and the EU finalized the Agreement on the withdrawal of the

United Kingdom of Great Britain and Northern Ireland from the European Union and the

European Atomic Energy Community (the “Withdrawal Agreement”).8 The

Withdrawal Agreement entered into force on February 1, 2020.9 Pursuant to the

Withdrawal Agreement, the UK left the EU as of the end of January 31, 2020 and entered

into a transition period that expired on December 31, 2020

ithdrawal of the

United Kingdom of Great Britain and Northern Ireland from the European Union and the

European Atomic Energy Community (the “Withdrawal Agreement”).8 The

Withdrawal Agreement entered into force on February 1, 2020.9 Pursuant to the

Withdrawal Agreement, the UK left the EU as of the end of January 31, 2020 and entered

into a transition period that expired on December 31, 2020.

To prepare for the expiration of the transition period, the UK government took actions to

provide regulatory certainty, including passing the European Union (Withdrawal) Act

2018 (the “EU(W)A”), which, at the expiration of the transition period, incorporated

relevant EU law and regulations into UK law and regulations, and granted existing

authority vested in certain EU institutions to the Financial Conduct Authority (“FCA”),

the Bank of England including the Prudential Regulation Authority (“PRA”), and His

Majesty’s Treasury (“HMT”). The foregoing actions by the UK government aimed to

preserve the regulatory status quo for UK entities benefitting from the Existing

Commission Actions in all material respects following the expiration of the transition

period.10 Commission staff has been engaged with staff of the relevant UK authorities to

learn about the regulatory and supervisory framework that now applies in the UK.

7 See Article 50 of the Treaty on European Union, available at https://eur-lex.europa.eu/legal-

content/EN/TXT/HTML/?uri=CELEX:12012M050&from=EN.

8 Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the

European Union and the European Atomic Energy Community (Nov. 12, 2019), available at https://eur-

lex.europa.eu/legal-content/EN/TXT/?qid=1580206007232&uri=CELEX%3A12019W/TXT%2802%29.

See also Questions and Answers on the United Kingdom's withdrawal from the European Union on 31

January 2020 (Jan

8 Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the

European Union and the European Atomic Energy Community (Nov. 12, 2019), available at https://eur-

lex.europa.eu/legal-content/EN/TXT/?qid=1580206007232&uri=CELEX%3A12019W/TXT%2802%29.

See also Questions and Answers on the United Kingdom's withdrawal from the European Union on 31

January 2020 (Jan. 24, 2020), available at

https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_104 (stating the President of the

European Council, Charles Michel, and the President of the European Commission, Ursula von der Leyen,

signed and the Prime Minister of the United Kingdom, Boris Johnson, would sign the Withdrawal

Agreement on January 24, 2020).

9 See “The EU-UK Withdrawal Agreement”, available at https://ec.europa.eu/info/strategy/relations-

non-eu-countries/relations-united-kingdom/eu-uk-withdrawal-agreement_en.

10 The Financial Services And Markets Act 2023 (“FSMA 2023”) provides for the revocation of certain

incorporated EU law in financial services, while empowering HMT and other relevant UK authorities to

replace incorporated EU law with legislation or rules designed specifically for UK markets in order to

establish a “comprehensive FSMA model” under which the FCA and PRA are delegated to set regulatory

standards “that work within an overall policy framework set by government and Parliament.” See FSMA

2023, Explanatory Notes, (June 29, 2023), available at

https://www.legislation.gov.uk/ukpga/2023/29/notes/division/1/index.htm. The UK government has

stated that it “expects that it will take a number of years to complete the process of revoking” incorporated

EU law. FSMA 2023, Explanatory Note 31. As such, FSMA 2023 provides that revocations of

incorporated EU law will not commence until HMT brings forth regulations to commence revocation.

https://www.legislation.gov.uk/ukpga/2023/29/notes/division/1/index.htm. The UK government has

stated that it “expects that it will take a number of years to complete the process of revoking” incorporated

EU law. FSMA 2023, Explanatory Note 31. As such, FSMA 2023 provides that revocations of

incorporated EU law will not commence until HMT brings forth regulations to commence revocation.

Page 4

Since 2019, the Divisions have issued staff letters which provided no-action positions

benefiting certain swap dealers, as well as certain MTFs, OTFs, and their market

participants.11 These CFTC staff letters were meant to maintain the status quo of the

Existing Commission Actions while the Commission worked with the relevant UK

authorities to analyze relevant UK law and, where appropriate, replicate the Existing

Commission Actions for UK entities. The Commission and the relevant UK authorities

have not yet completed this work. Accordingly, the Divisions are further extending the

time-limited no-action positions provided in CFTC Staff Letter 22-16, as described below.

III.

Staff Positions

(A)

MPD No-Action Positions

Pursuant to the EU Comparability Determinations and related Commission rules and

guidance, the Commission has recognized that compliance by certain registered swap

dealers with certain requirements under EU laws and regulations will constitute

compliance with corresponding requirements under certain Commission regulations.

Because the EU laws and regulations relevant for the EU Comparability Determinations

have been incorporated into UK laws and regulations pursuant to the EU(W)A, MPD

believes that temporarily extending the no-action position is warranted

alers with certain requirements under EU laws and regulations will constitute

compliance with corresponding requirements under certain Commission regulations.

Because the EU laws and regulations relevant for the EU Comparability Determinations

have been incorporated into UK laws and regulations pursuant to the EU(W)A, MPD

believes that temporarily extending the no-action position is warranted.

Accordingly, MPD will not recommend that the Commission take enforcement action

against a swap dealer registered with the Commission for failure to comply with

Commission regulation(s) found to be comparable in an EU Comparability Determination

if, in lieu of complying with such Commission regulation(s), it complies with the UK laws

and regulations incorporated pursuant to the EU(W)A in the same manner and subject to

the same conditions contained in the EU Comparability Determinations with respect to

the corresponding EU laws and regulations.

This MPD position will expire upon the earlier of either: (i) the effective date of any

comparability determination issued by the Commission for the UK to the extent such

FSMA 2023 Section 86. Until this time, EU law that HMT has not commenced revocation on will remain

in place, including those requirements material to the Existing Commission Actions.

11 See CFTC Staff Letter 22-16, CFTC Staff Letter 21-24, Extended No-Action Relief in Connection With

Certain Previously Granted Commission Determinations and Exemptions, in Response to the Withdrawal

of the United Kingdom From the European Union (November 17, 2021) available at

https://www.cftc.gov/csl/21-24/download, CFTC Staff Letter 21-17, Amended No-Action Relief in

Connection With Certain Previously Granted Commission Exemptions in Response to the Withdrawal of

the United Kingdom From the European Union (August 31, 2021) available at

https://www.cftc.gov/csl/21-17/download, CFTC Staff Letter 20-39, Revised No-Action Relief in

Connection With Certain Previously Granted Commission Determinations and E

, CFTC Staff Letter 21-17, Amended No-Action Relief in

Connection With Certain Previously Granted Commission Exemptions in Response to the Withdrawal of

the United Kingdom From the European Union (August 31, 2021) available at

https://www.cftc.gov/csl/21-17/download, CFTC Staff Letter 20-39, Revised No-Action Relief in

Connection With Certain Previously Granted Commission Determinations and Exemptions, in Response

to the Withdrawal of the United Kingdom From the European Union (November 24, 2020) available at

https://www.cftc.gov/csl/20-39/download, CFTC Staff Letter 19-08, No-Action Relief in Connection

With Certain Previously Granted Commission Determinations and Exemptions, in Order to Account for

the Anticipated Withdrawal of the United Kingdom From the European Union (April 5, 2019), available

at https://www.cftc.gov/csl/19-08/download.

Page 5

determination encompasses the subject matter of the EU Comparability Determinations;

or (ii) December 31, 2026.

(B)

DMO No-Action Positions

In the Exemptive Order, the Commission determined that the EU’s regulatory

frameworks for MTFs and OTFs, respectively, satisfy the standard set forth in section

5h(g) of the Commodity Exchange Act (“CEA”)12 for granting an exemption from the

requirement to register with the Commission as a swap execution facility (“SEF”)

pursuant to CEA section 5h(a)(1).13 Based on this determination, the Commission

granted an exemption from SEF registration to each of the MTFs and OTFs listed in

Appendix A to the Exemptive Order, as such Appendix A may be amended by the

Commission from time to time. Facilities that are granted an exemption from SEF

registration pursuant to CEA section 5h(g) are also eligible facilities upon which

counterparties may satisfy the trade execution requirement of CEA section 2(h)(8).14

Because the EU laws and regulations relevant to the Exemptive Order have been

incorporated into UK laws and regulations, DMO believes that temporary no-action

positions are warranted

ies that are granted an exemption from SEF

registration pursuant to CEA section 5h(g) are also eligible facilities upon which

counterparties may satisfy the trade execution requirement of CEA section 2(h)(8).14

Because the EU laws and regulations relevant to the Exemptive Order have been

incorporated into UK laws and regulations, DMO believes that temporary no-action

positions are warranted. Accordingly, DMO will not recommend that the Commission

take an enforcement action against:

(a)

An MTF or OTF that is authorized within the UK and listed in Appendix A to this

letter (each, an “Eligible UK Facility”), for failure to register as a SEF pursuant

to CEA section 5h(a)(1) and Commission Regulation 37.3(a)(1); or

(b)

A counterparty that is subject to the trade execution requirement pursuant to

CEA section 2(h)(8), if such counterparty executes a swap that is subject to such

trade execution requirement on an Eligible UK Facility. 15

12 CEA section 5h(g) authorizes the Commission to grant an exemption from SEF registration if the

Commission finds that a “swap execution facility … is subject to comparable, comprehensive supervision

and regulation on a consolidated basis by … the appropriate governmental authorities in the home country

of the facility.” 7 U.S.C. § 7b-3(g).

13 Pursuant to CEA section 5h(a)(1), no person may operate a facility for the trading or processing of swaps

unless the facility is registered by the Commission as a SEF or as a designated contract market. 7 U.S.C. §

7b-3(a)(1). CEA section 5h(a)(1) is implemented in the Commission’s regulations through Commission

Regulation 37.3(a)(1). 17 CFR 37.3(a)(1).

14 Facilities that are granted an exemption from SEF registration pursuant to CEA section 5h(g) may also

offer trading in swaps that are not subject to the trade execution requirement to U.S. person counterparties.

15 This no-action position does not affect any other requirements under the CEA or the Commission’s

regulations

ions through Commission

Regulation 37.3(a)(1). 17 CFR 37.3(a)(1).

14 Facilities that are granted an exemption from SEF registration pursuant to CEA section 5h(g) may also

offer trading in swaps that are not subject to the trade execution requirement to U.S. person counterparties.

15 This no-action position does not affect any other requirements under the CEA or the Commission’s

regulations. In particular, swap transactions executed on Eligible UK Facilities must still comply with:

(1) The reporting requirements of Parts 43 and 45 of the Commission’s regulations which continue to apply

to counterparties that are subject to such reporting requirements;

(2) The swap trading eligibility requirement of CEA section 2(e); and

(3) The following clearing-related requirements:

Page 6

The DMO no-action positions taken in this letter will expire upon the earlier of either: (i)

the effective date of any exemptive order issued by the Commission pursuant to CEA

section 5h(g), for MTFs and OTFs authorized within the UK; or (ii) December 31, 2026.

IV.

Conclusion

This letter, and the positions taken herein, represent the views of the Divisions only, and

do not necessarily represent the position or view of the Commission or of any other office

or division of the Commission. This letter and the no-action positions taken herein are

not binding on the Commission.16 The staff positions taken in this letter do not excuse

persons relying on it from compliance with any other applicable requirements contained

in the CEA or in Commission regulations. Further, this letter, and the positions taken

herein, are based upon the facts and circumstances presented to the Divisions. Any

different, changed, or omitted material facts or circumstances might render the staff

positions taken in this letter void

do not excuse

persons relying on it from compliance with any other applicable requirements contained

in the CEA or in Commission regulations. Further, this letter, and the positions taken

herein, are based upon the facts and circumstances presented to the Divisions. Any

different, changed, or omitted material facts or circumstances might render the staff

positions taken in this letter void.

Finally, as with all staff letters, the Divisions retain the authority to condition further,

modify, suspend, terminate, or otherwise restrict the terms of this letter, and the positions

taken herein, in their discretion.

If you have any questions concerning this correspondence, please contact Roger Smith,

Associate Chief Counsel, DMO, at (202) 418-5344 or rsmith@cftc.gov; Frank Fisanich,

(i)

When a swap transaction executed by a U.S. person on an Eligible UK Facility is a “customer”

position subject to CEA section 4d, the transaction, if intended to be cleared, must be cleared

through a Commission-registered futures commission merchant (“FCM”) at a Commission-

registered derivatives clearing organization (“DCO”);

(ii)

When a swap transaction executed by a U.S. person on an Eligible UK Facility is a “proprietary”

position under Commission Regulation 1.3, the transaction, if intended to be cleared, must be

cleared either through a Commission-registered DCO or a clearing organization that has been

exempted from DCO registration by the Commission pursuant to CEA section 5b(h) (an “Exempt

DCO”); and

O”);

(ii)

When a swap transaction executed by a U.S. person on an Eligible UK Facility is a “proprietary”

position under Commission Regulation 1.3, the transaction, if intended to be cleared, must be

cleared either through a Commission-registered DCO or a clearing organization that has been

exempted from DCO registration by the Commission pursuant to CEA section 5b(h) (an “Exempt

DCO”); and

(iii)

When a swap transaction is subject to the Commission’s clearing requirement under Part 50 of

the Commission’s regulations, and is entered into by a person that, pursuant to CEA section

2(h)(1), is subject to such clearing requirement, the transaction must be cleared either through a

Commission-registered DCO or an Exempt DCO; provided that, consistent with (i) above, if the

transaction is a “customer” position subject to CEA section 4d, it must be cleared through a

Commission-registered FCM at a Commission-registered DCO, and cannot be cleared through

an Exempt DCO.

If, as a result of the clearing arrangements that an Eligible UK Facility has in place, some swap transactions

executed on the Eligible UK Facility are cleared by a clearing organization that is not a Commission-

registered DCO, the Eligible UK Facility must, as a condition of receiving the above no-action position from

the SEF registration requirement, have a rule in its rulebook that requires the types of swap transactions

described in clauses (i), (ii) and (iii) above, if intended to be cleared, to be cleared in a manner consistent

with the requirements described in clauses (i), (ii) and (iii), respectively.

16 See § 140.99(a)(2), 17 CFR 140.99(a)(2) (“A no-action letter binds only the issuing Division . . . and not

the Commission or other Commission staff.”).

ook that requires the types of swap transactions

described in clauses (i), (ii) and (iii) above, if intended to be cleared, to be cleared in a manner consistent

with the requirements described in clauses (i), (ii) and (iii), respectively.

16 See § 140.99(a)(2), 17 CFR 140.99(a)(2) (“A no-action letter binds only the issuing Division . . . and not

the Commission or other Commission staff.”).

Page 7

Chief Counsel, MPD, at (202) 418-5949 or ffisanich@cftc.gov; or Jacob Chachkin,

Associate Chief Counsel, MPD, at (202) 418-5496 or jchachkin@cftc.gov.

Sincerely,

___________________________________

Amanda L. Olear

Director

Market Participants Division

___________________________________

Vincent McGonagle

Director

Division of Market Oversight

cc:

Regina Thoele, Compliance

National Futures Association, Chicago

Michael Otten, OTC Derivatives

National Futures Association, New York

Page 8

Appendix A

List of UK Authorized MTFs and OTFs covered by this No-Action Letter

Trading Facility Name