EXPLANATORY NOTE
(This note is not part of the Regulations)
These Regulations set out the Treasury’s equivalence determination in respect of the regulatory framework that applies to certain central counterparties (CCPs) that are established in the United States of America (USA) and registered as a derivatives clearing organisation (DCO) with the Commodity Futures Trading Commission (CFTC).
These Regulations are made in exercise of the powers conferred by Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories, as retained in UK law by virtue of the European Union (Withdrawal) Act 2018 and amended by regulations made under section 8 of that Act (EMIR). Article 25(1) of EMIR provides that a CCP established overseas may only provide clearing services to clearing members or trading venues established in the United Kingdom where that CCP is recognised by the Bank of England. The Bank of England is only able to recognise a CCP where the legal and supervisory arrangements of the overseas market in which they operate have been determined, by the Treasury, as equivalent to the United Kingdom.
Regulation 2 sets out the Treasury’s determination that the regulatory framework in relation to CFTC-authorised CCPs is equivalent to the United Kingdom’s framework. CFTC-authorised CCPs are DCOs which have either been designated by the Financial Stability Oversight Council of the USA as systemically important or elected to become subject to the provisions of Subpart C of Part 39 of Title 17 of the USA Code of Federal Regulations.
Regulation 3 sets out the requirements that a CFTC-authorised CCP specified in the Schedule must have in its internal rules and procedures in order to fall within the determination made in regulation 2(a).
Regulation 4 sets out that some of the requirements in regulation 3 do not apply in relation to agricultural commodity derivative contracts which meet the conditions set out in this regulation.
Regulation 5 provides that, where a CFTC-authorised CCP is also authorised by the Securities and Exchange Commission of the USA, the determination only applies in relation to the clearing services they are authorised to provide by the CFTC.
References for the grades, prices, weights, measures or conversion factors for agricultural commodities and associated products as published by the United States Department of Agriculture can be found online at https://www.ams.usda.gov/grades-standards and in the Agricultural Handbook Number 697 dated June 1992, which can be found online at https://www.ers.usda.gov/publications/pub-details/?pubid=41881.
A person unable to access the law of the United States of America or the references published by the United States Department of Agriculture electronically may access them by inspection free of charge at HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ.
A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen. A de minimis impact assessment is available from HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ and is published with the Explanatory Memorandum alongside this instrument at www.legislation.gov.uk.