SPEECHES & TESTIMONY

Statement of Commissioner Dan M. Berkovitz on the Commission’s Orders of Registration for the European Energy Exchange, Euronext Amsterdam, and Euronext Paris

November 5, 2019

I support the Commission’s Orders of Registration to permit the European Energy Exchange (“EEX”), Euronext Amsterdam N.V., and Euronext Paris SA to offer direct access to their members and market participants in the United States.[1]  Section 4(b) of the Commodity Exchange Act (“CEA”) and part 48 of the Commission’s regulations require a determination that the foreign board of trade (“FBOT”) and its clearing organization are subject to comparable and comprehensive regulation in their home jurisdictions.  FBOT registration is subject to conditions specified in the Commission’s rules, and to any additional terms and conditions set forth in the Order of Registration.[2]  Once registered, an FBOT can offer its products directly into the U.S. market without having to register as a designated contract market, and without having to clear through a registered derivatives clearing organization.  These valuable commercial benefits are a direct result of the Commission’s ability to rely on the comparable and comprehensive regulation of overseas exchanges and clearing organizations in their home countries.

The Orders of Registration for EEX, Euronext Amsterdam, and Euronext Paris include important references to international comity.  In each Order, the Commission reserves the right to “condition, modify, suspend, terminate, or otherwise restrict” the Order, based on “any material changes in the applicable regulatory regimes, including developments relating to international comity . . . .”[3]  As the Commission discussed during its recent consideration of a proposed rule to exclude the European Stability Mechanism from the definition of financial end user in the Commission’s margin regulations, comity is a two-way street.[4]  Reciprocal respect for the interests of other sovereigns is an important factor in establishing comity, and is a critical feature in ensuring harmonious regulation of entities operating across borders and jurisdictions.  I am pleased that the Commission has emphasized comity in today’s Orders, and I encourage it to continue conditioning future grants of regulatory benefits for foreign entities on reciprocal treatment for U.S. firms operating overseas.

The Commission’s regulatory regime recognizes the value of comity amongst regulators in the successful operation of modern, global derivatives markets.  In the case of FBOTs, the Commission acknowledges the importance of comity through a willingness to rely on comparable and comprehensive regulation of overseas exchanges and clearing organizations by foreign regulators.  A lack of reciprocity could call into question whether a foreign regulatory regime is in fact comparable to the Commission’s framework for markets and market participants in the United States.  All stakeholders should continue working to preserve comity and its role in advancing well-regulated derivatives markets throughout the world.

I thank my fellow Commissioners and staff of the Division of Market Oversight and the Office of General Counsel for their work on this matter.

 

 


 

[1] Section 4(b)(1)(A) of the CEA defines “direct access” as “an explicit grant of authority by a foreign board of trade to an identified member or other participant located in the United States to enter trades directly into the trade matching system of the foreign board of trade.”

[2] For example, part 48 provides that the Commission may revoke an FBOT’s registration after notice and an opportunity to respond.  See 17 C.F.R. § 48.9. 

[3] EEX Order of Registration at 2; Euronext Amsterdam Order of Registration at 2; and Euronext Paris Order of Registration at 2.  The Orders also provide that the FBOTs would be provided notice and an opportunity to respond. 

[4] See Commodity Futures Trading Commission, Open Meeting to Consider Proposed Amendments to Regulation 23.161—Compliance Schedule Extension; and Proposed Amendments to the Margin Rule for Uncleared Swaps—23.151 and 23.157 (Oct. 16, 2019), available at https://www.youtube.com/watch?v=T3nAxEpHf3w&feature=youtu.be.