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CFTC Approves Exemption From SEF Registration Requirements for Multilateral Trading Facilities and Organized Trading Facilities Authorized Within the EU

On December 8, in response to a request by the European Commission (EC), the Commodity Futures Trading Commission issued an order exempting certain multilateral trading facilities (MTFs) and organized trading facilities (OTFs) authorized within the European Union (EU) from the requirement to register with the CFTC as swap execution facilities (SEFs).

The CFTC determined that requirements under the EU’s (1) new Markets in Financial Instruments Regulation (MiFIR); (2) amended Markets in Financial Instruments Directive (MiFID II); and (3) Market Abuse Regulation establish regulatory frameworks for MTFs and OTFs which satisfy the requirements of Section 5h(g) of the Commodity Exchange Act, which provides that the CFTC may exempt from SEF registration a foreign SEF that is subject to comparable, comprehensive supervision and regulation in the foreign SEF’s home country.

The order will go into effect on January 3, 2018, when requirements under MiFIR and MiFID II begin to apply. On that date, transactions that are subject to the CFTC’s trade execution requirements will be able to be executed on MTFs and OTFs listed in the order. The exempted SEFs will be able to offer trading in swaps that are not subject to the CFTC’s trade execution requirement to US person counterparties.

The order provides that the EC may request that additional MTFs and OTFs that satisfy the requirements of Section 5h(g) of the CEA be added to the list of MTFs and OTFs that are granted exempt SEF status under the order.

©2018 Katten Muchin Rosenman LLP

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About this Author

Kevin M. Foley, Finance Lawyer, Katten Llaw Firm
Partner

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.

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312-902-5372
Timothy Nolan, Katten Law Firm, Chicago, Corporate Law Attorney
Associate

Timothy Nolan concentrates his practice on transactional, corporate and regulatory aspects of financial services matters. Timothy is able to provide legal services to a wide variety of clients, including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, commodity trading advisers, financial institutions and general corporate clients.

Prior to joining Katten, Timothy served as the CEO and the president of the board of directors of a small commercial real estate company and spent 10 years in the scrap recycling industry, including several years as general manager of a mid-sized company. In his time in the scrap recycling industry, Timothy worked with traders, brokers, importers and exporters, and other industry professionals around the world relating to ferrous, non-ferrous and precious metal recycling, together with paper and plastic recycling.

312-902-5447