CFTC Amends Brexit No-Action Relief to Include GFI Securities and Integral

The Commodity Futures Trading Commission (CFTC) has amended the terms of the relief it granted to UK multilateral and organised trading facilities to resolve any issues that may arise in case Britain crashes out of the EU without a deal.

This new letter effectively expands the scope of its previously-issued no-action relief to three MTFs and one OTF authorized in the UK, but were not included in its previous coverage. In particular, the CFTC staff identified GFI Brokers – MTF, GFI Securities LTD – MTF, GFI Securities LTD – OTF, and Integral MTF.

The US regulator also confirms an existing no-action and exemptive relief for European institutions to their UK equivalents in anticipation of a no-deal Brexit.

The move means that UK firms can qualify for time-limited relief from other regulatory requirements, including uncleared swap margin rules and swap clearing requirements. These letters will permit UK firms to rely on longstanding CFTC staff relief related to a series of issues, including introducing broker registration, swap data reporting and the trading and clearing of certain swaps.

The temporary relief, which covers a transition period of up to one year, permits British firms to transfer swaps to an affiliate without such swaps becoming subject to the CFTC’s swap clearing requirement or uncleared swap margin requirement. Additionally, they will be able to access and use trading venues authorised by the agency to satisfy their regulatory obligations, including derivatives trading obligations.

The CFTC has taken a number of other steps to facilitate a smooth transition upon withdrawal of the UK from the EU. For example, it had signed agreements with UK authorities last year to provide mutual recognition of each other’s regulatory frameworks.

“The derivatives markets are among the most interconnected in the world, and the City of London is a critical part of that financial system. This relief will help ensure that our markets will not be adversely affected by the anticipated end of the transition period later this month,” said DCR Director, Clark Hutchison.

The current transition deal allows cross-border financial services to continue uninterrupted only until the end of a transition period. However, if UK leaders fail to have their divorce settlement passed, it would leave US customers cut off from UK-based market operators especially when no contingency measures are set in place.

Without such an arrangement, clearinghouses may not get regulatory approvals, leading to operational problems such as US banks facing much higher capital charges when they use it to process their trades.