Mrs. Mairéad McGuinness,
Commissioner for Financial services, financial stability and Capital Markets Union,
The European Commission,
200 Rue la Loi,
Brussels 1049,
Belgium

9 December 2020

Dear Commissioner McGuinness,

Equivalence – Derivatives Trading Obligation (DTO)

The trade associations signing this letter (the signatory associations) are writing to you to request that the European Commission recognize the equivalence of United Kingdom (UK) trading venues for the purpose of the derivatives trade obligation (DTO), before the end of the transition period provided for in the Withdrawal Agreement between the European Union (EU) and the United Kingdom (UK).

If equivalence of UK derivatives trading venues is not recognized, EU counterparties (including those that trade through a UK branch) will not be able to interact with UK counterparties in trading venues in either jurisdiction (or with third-country firms, including UK branches of those firms, in UK trading venues) in derivatives contracts that are subject to the DTO. In practice, this will mean that EU and UK counterparties will only be able to trade with each other in contracts subject to the DTO on U.S. Swap Execution Facilities (SEFs), as these are venues which benefit from equivalence decisions by both the EU and UK.

Furthermore, EEA firms that trade through branches in the UK are subject to duplicative DTOs under EU and UK rules, which will result in them being unable to interact with UK or international (non-UK and non-EU) firms on either UK or EU venues subject to the DTO. However, even if the UK DTO was not applied to UK branches of non-UK firms, UK branches of EEA firms (like EEA firms that do not operate through a branch in the UK) would still not be able to trade on UK or EU venues with UK counterparties (or on UK venues with other international counterparties) in contracts subject to the EU DTO in the absence of equivalence.