BoE and CFTC reinforce cross-border supervision of derivatives clearing in new agreement

UK and US derivatives watchdogs sign MOU to establish new framework for overseeing international clearing houses.

Regulators for the UK and US derivatives markets have signed a new cross-border supervisory agreement for clearing houses operating in both countries. 

The Bank of England (BoE) and the US Commodity Futures Trading Commission (CFTC) announced the signing of a new memorandum of understanding (MOU) where they have established a cooperation framework for overseeing international clearing houses.  

The MOU supersedes a 2009 agreement and follows a 2019 joint statement by the CFTC, BoE, and other UK authorities on the continuity of derivatives trading and clearing post-Brexit.

The agreement last year included measures such as equivalence for US trading venues and clearinghouses to continue providing services to the UK, exemption for UK market participants on certain US derivatives trading requirements, as well as expanded supervisory cooperation and information sharing. 

Through the MOU, the CFTC and the BoE express their willingness to cooperate in the interest of fulfilling their respective regulatory mandates, particularly in preserving the benefits of cross-border clearing activity,” the CFTC stated.  

Clearing houses that operate in both the US and UK include ICE and LCH. 

In an op-ed published on, co-authored by CFTC Chairman and CEO Heath Tarbert and BoE Deputy Governor for Financial Stability Jon Cuncliffe, the agreement sets out a number of principles in the supervision of cross-border clearing activity and how to avoid conflicting or overlapping regulatory regimes. 

Through the agreement, as leading global infrastructure regulators, we have embraced that philosophy and put in place the institutional structures for years of co-operative engagement. It champions the goal of mutual deference as set out in G20 commitments, and enshrines the understanding between us that the home country authority is accountable in its jurisdiction for the resilience of central counterparties under its supervision,” the two regulators said in the op-ed. 

The MOU comes a month after the European Commission granted equivalence for UK clearing houses for 18 months from January 2021 as the Brexit transition period ends.  

In a statement, the Commission said the time-limited equivalence decision was made to ensure market participants have enough time to reduce their exposure to UK-based CCPs.