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If appropriate equivalence decisions are not in place by the end of the transition period provided for in the Withdrawal Agreement between the EU and the UK (the transition period), there will be significant issues for counterparties subject to the derivatives trading obligation (DTO) and other requirements under derivatives legislation in both the EU and the UK. The lack of such equivalence decisions is also likely to exacerbate the fragmentation of liquidity in over-the-counter (OTC) derivatives markets between the EU and the UK resulting from Brexit.
The paper explains that equivalence is the best solution for addressing conflicts and avoiding such fragmentation, by setting out the limitations of the other mitigating actions that have been proposed in the event that equivalence is not granted.
Click on the PDF below to read the letter in full.
for ISDA Analysis of the Impact of Brexit on the MIFID Derivatives Trading Obligation Impact of Brexit on the Derivatives Trading Obligation(pdf)