ARTICLE
18 November 2019

CFTC Approves EU FBOT Applications And Technical Corrections For Consumer Data Protection Rules

CW
Cadwalader, Wickersham & Taft LLP

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Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
The CFTC approved (i) three foreign board of trade applications submitted by European entities and (ii) technical corrections to Part 160 data privacy rules.
Worldwide Finance and Banking

The CFTC approved (i) three foreign board of trade applications submitted by European entities and (ii) technical corrections to Part 160 data privacy rules.

Foreign Board of Trade ("FBOT") Registration Applications

The CFTC approved three FBOT applications that will permit U.S. market participants to have direct access to the trade matching system of the FBOTs. Previously, the FBOTs had been given permission by the CFTC to provide direct access to U.S. market participants through no-action letters.

The three FBOTs are (i) Euronext Amsterdam N.V., (ii) Euronext Paris SA, and (iii) European Energy Exchange. Each order was approved by a four-to-one vote, with CFTC Commissioner Brian Quintenz dissenting. CFTC Chair Heath Tarbert and Commissioners Dawn D. Stump and Dan M. Berkovitz each issued statements expressing the reasons for their support of the orders of registration.

CFTC Rule 160.30 ("Procedures to Safeguard Customer Records and Information")

The CFTC proposed amending CFTC Rule 160.30. According to the CFTC, the amendment was intended to address an inadvertent deletion of certain language when the rule was amended in 2011.

CFTC Veterans Affinity Group

The CFTC also announced the creation of a Veterans Affinity Group. Founding members of the group participated in a signing ceremony for the group's charter.

Commentary

Nihal Patel

The FBOT orders are, from a substantive perspective, business-as-usual. (In each case, the CFTC is essentially formalizing the status quo.) Ongoing concerns remain about "EMIR 2.2" and whether certain European regulatory requirements would be applied by European regulators to U.S. CCPs doing business in Europe. These uncertainties have made the CFTC (in particular, Commissioner Quintenz) wary of giving additional relief to European-regulated financial institutions, lest the relief be unrequited.

Mr. Quintenz stressed that he does not disagree with the "substance" of the registration orders, but with the timing. He said that "trust in our E.U. counterparts" is "misplaced until the E.U. can provide assurance that the CFTC-EC CCP Agreement [of 2016] will be upheld." The statements of Mr. Tarbert, Ms. Stump and Mr. Berkovitz are each, essentially, responses to Mr. Quintenz. (Ms. Stump's statement also includes a useful backgrounder on the CFTC FBOT registration scheme.) Each of these Commissioners specifically noted language in the new orders that provides the CFTC with the ability to withdraw or amend the registration orders. In particular, Mr. Tarbert noted that the added language "clarifies" the CFTC's ability to revoke the FBOT registrations if it has concerns about the EU regulatory regime, "including developments relating to international comity."

As with his dissent on a similar CFTC action to formalize no-action relief for the European Stability Mechanism, Mr. Quintenz seems to be advocating for a trust-no-one approach. In each of these cases, the CFTC is not really "giving" anything that cannot be readily taken away, but Mr. Quintenz is of the view that no olive branches are appropriate without "assurance" from the EU regulators that they will "respect[] the CFTC's ultimate authority over U.S. CCPs."

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