On July 11, the European Commission (EC) issued a memorandum announcing its agreement with the United States Commodity Futures Trading Commission (CFTC) relating to their joint understanding on a package of measures for regulating cross-border derivatives.

The agreement acknowledges that as the derivatives market is international, notwithstanding the high degree of similarity between the two jurisdictions’ respective requirements, subjecting the global market to “simultaneous application of each other’s requirements” could lead to “conflicts of law, inconsistencies and legal uncertainty.”

The agreement confirms that the CFTC plans to use non-action relief from certain transaction-based requirements in relation to bilateral uncleared swaps.  If the CFTC’s trade execution requirement is triggered before March 15, 2004, then the CFTC has agreed to extend appropriate time-limited transitional relief to some EU multilateral trading facilities.  The CFTC is also considering extending regulatory relief to trading platforms if they are subject to requirements comparable to those imposed on swap execution facilities.

The EC, CFTC and the European Securities and Markets Authority will continue to work together on further issues including harmonised international rules on margins for uncleared swaps and issues relating to reporting to trade repositories (e.g. data fields, blocking and secrecy laws).  CFTC Press Release.  European Commission Memorandum.