The EU is concerned about the impact of SEF rules on firms outside the US

The European Commission has expressed concern that the US government shutdown is preventing a deal between the EU and US regulators, just as new swaps rules come into force for firms based both in and outside the US.

Earlier this week, before the US government shutdown, European commissioner Michel Barnier contacted the CFTC  to express its concerns about the extra-territorial impact of the SEF rules. In the letter addressed to CFTC chief Gary Gensler, Barnier requested that the SEF registration deadline be delayed for non-US firms to allow more time for a specific US-EU deal. However, the organisation has as yet received no reply, and the deadline for SEF registration has now passed.

“The CFTC is closed,” a spokesperson for the EC told Banking Technology. “The current situation is problematic as US rules on SEF registration have entered force and no meaningful relief has yet been provided. We will continue to do our best to find a solution with the Americans as soon as possible.”

The Commission is concerned that non-US based businesses could be penalised if they don’t comply with the SEF rules, which took effect on 2 October – despite the fact that in July, the CFTC and EC had agreed in principle that they would respect each other’s rules on derivatives on the grounds that the two rulebooks were nearly identical.

The European Commission told Banking Technology that as things stand, the US rules on SEF registration will like lead to “less transparency, more liquidity fragmentation and higher funding costs with potentially adverse impact on the real economy.”

“As Commissioner Barnier has made clear on a number of occasions, the agreement found in the summer – Path forward – was a crucial step,” a European Commission spokesperson said. “He wants to see that agreement implemented.  Both the US and EU share the same goal: tough and safe regulation but no overlapping or competing rules.”

The CFTC is currently running a ghost ship with around 30  of its 200 staff  retained, due to the government shutdown resulting from the failure of the Republican and Democrat political parties to agree a deal on the US budget.