ISDA welcomes the introduction of a mechanism to avoid duplicative and/or conflicting rules on derivatives trading for parties which may be subject to both MiFIR and non-EU derivative trading regimes. From the point of view of successful implementation of this provision, it will be essential to adopt an approach to equivalence based on regulatory outcomes and not detailed correspondence of respective jurisdictions’ rules.
ISDA also believes that the current drafting does not fully address the range of situations in which a conflict between different jurisdictions’ rules could arise.
MiFIR Article 26a(3) states that where counterparties enter into a transaction subject to MiFIR, they shall be deemed to be in compliance with the obligations of MiFIR where: (i) an equivalence decision has been made in accordance with paragraph 2; and (ii) at least one of the counterparties is established in the third country which has been deemed equivalent.
ISDA believes that this provision does not take account of the fact that, in certain circumstances, two EU counterparties that trade and are subject to MiFIR may also be subject to a third country’s regime due to the nature of the derivative contracts they trade or other factors that mean that the parties will have obligations under the third country’s regime. For example, Section 722(d) of the US Dodd-Frank Act states that non-US counterparties may be subject to the provision of the US Commodities Exchange Act, where their activities:
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have a direct and significant connection with activities in, or effect on, commerce of the United States;
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or contravene such rules or regulations as the Commission may prescribe or promulgate as are necessary or appropriate to prevent the evasion of any provision of this Act.
ISDA believes that, if an equivalence decision has been made on a third country regime and the parties are subject to both MiFIR and that third country regime, the EU counterparties should be deemed to have met their obligations under MiFIR if they are in compliance with the equivalent third country regime.
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© ISDA - International Swaps and Derivatives Association
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