The CFTC and the Bank of England entered into a Memorandum of Understanding ("MOU") relating to the supervision of clearinghouses operating on a cross-border basis in the United States and the United Kingdom. The regulators indicated that the MOU is intended to "strengthen the relationship" between the regulatory authorities with responsibility over the "largest and most important" derivatives markets and central counterparties (or "CCPs") in the world.
The MOU terminates and supersedes the 2009 CFTC-UK Financial Services Authority Clearing MOU and also is subsequent to a 2019 joint statement by the CFTC and several UK authorities concerning consistency in derivatives trading and clearing after Brexit. The MOU sets forth the terms under which the regulators will cooperate in supervising relevant clearinghouses, including through information sharing.
In a joint op-ed at Risk.net outlining the arrangement, CFTC Chair Heath Tarbert and Bank of England Governor for Financial Stability Jon Cunliffe stated: "In order to thrive and to support safe and efficient global markets, the regulation and supervision of [cross-borders infrastructures] needs to maintain the highest levels of resilience, commensurate with the risks. And we also need to avoid conflicting or overlapping regimes, which is why this regulator relationship needs to be founded upon the right degree of deference to home supervisors."
Commentary
While the MOU is not likely to be significant for most market participants, its announcement is yet another in a line of regulatory actions taken on derivatives clearing in a cross-border context that suggest regulators are moving toward a more cooperative approach to oversight of the market.
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