BoE, CFTC set plan for cross-border derivatives trading if no-deal Brexit occurs

Bank of England and the U.S. Commodity Futures Trading Commission confirmed Monday that cross-border derivatives trading will continue for three years under existing rules if the U.K. exits the European Union without an agreement, according to a joint statement.

To ensure that Brexit won't create regulatory uncertainty, the U.K. and the U.S. regulators said Monday that if the U.K. withdraws from the EU without an agreement::

• U.S. central counterparty clearinghouses will be able to continue providing services in the U.K. and to U.K. firms on the same basis as they do now through the U.K.'s temporary recognition regime for non-U.K. CCPs.

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• U.K. firms will continue to be able to access CFTC-regulated exchanges on the same basis as EU firms do and will be able to continue providing services in the U.S.
• U.K. firms will be able to apply CFTC margin rules for derivatives contracts with U.S. counterparties regulated by the CFTC.

The CFTC will issue new "no-action letters" to U.K. market participants confirming the existing "no-action letters directed at EU market participants" to let them conduct broker registration, swap data reporting, and the trading and clearing of interaffiliate swaps under existing terms.

The CFTC also intends to grant new compliance and exemption orders that will permit U.K. firms to satisfy CFTC entity, transaction and margin requirements for uncleared swaps by complying with relevant U.K. laws.

"London is, and will remain, a global center for derivatives trading and clearing," said J. Christopher Giancarlo, chairman of the CFTC, in a news release. "Given the long-established cooperation between the CFTC and the Bank of England, the Financial Conduct Authority, and Her Majesty's Treasury, I am pleased to announce these important measures. They provide a bridge over Brexit through a durable regulatory framework upon which the thriving derivatives market between the U.K. and the U.S. may continue and endure."

FCA CEO Andrew Bailey said in the news release: "We have worked closely with the CFTC and other U.K. authorities on these measures to ensure continuity and stability for consumers, investors and other market participants, regardless of the outcome of the U.K.'s withdrawal from the EU. Cooperation with our international partners has always been an important part of our work, and it will remain so after Brexit."