Derivatives, Legislative and Regulatory Weekly Update (July 25, 2025)
Client Alert | July 25, 2025
From the Derivatives Practice Group: This week, the CFTC’s Division of Market Oversight and the Division of Clearing and Risk announced they have taken a no-action position regarding swap data reporting and recordkeeping regulations.
New Developments
CFTC Staff Issues No-Action Letter Regarding Event Contracts. On July 23, the CFTC’s Division of Market Oversight and the Division of Clearing and Risk announced they have taken a no-action position regarding swap data reporting and recordkeeping regulations in response to a request from the Chicago Mercantile Exchange Inc. (“CME”), a designated contract market and derivatives clearing organization. The divisions will not recommend the CFTC initiate an enforcement action against CME or its participants for failure to comply with certain swap-related recordkeeping requirements and for failure to report to swap data repositories data associated with binary option transactions executed on or subject to the rules of CME, subject to the terms of the no-action letter. [NEW]
CFTC Issues Advisory on Referrals for Potential Criminal Enforcement. On July 9, the CFTC’s Division of Enforcement (“DOE”) issued an advisory to provide guidance describing its plan to address criminally liable regulatory offenses in accordance with Executive Order 14294, Fighting Overcriminalization in Federal Regulations. The advisory announces the framework to be followed when DOE, as the CFTC division responsible for making referrals to the Department of Justice (“DOJ”), considers whether to refer potential violations of criminal regulatory offenses to DOJ. The advisory also includes a set of factors DOE staff should consider when determining whether to refer alleged violations of criminal regulatory offenses to DOJ.
CFTC Staff Issues No-Action Letter Extension Regarding Counterparties Clearing Swaps through Relief DCOs. On July 9, the CFTC issued a no-action letter extending the no-action position in CFTC Staff Letter No. 22-18 concerning certain swap reporting requirements of Part 45 of the CFTC’s regulations. The letter applies to counterparties clearing swaps through derivatives clearing organizations (“DCOs”) operating consistent with a CFTC exemptive order or a CFTC Division of Clearing and Risk no-action letter (Relief DCOs).
SEC Commissioner Peirce Releases Statement on Tokenization of Securities. On July 9, SEC Commissioner Hester M. Peirce released a statement that “[t]okenized securities are still securities” and “market participants must consider – and adhere to – the federal securities laws when transacting” in tokenized securities. Commissioner Peirce said “[m]arket participants who distribute, purchase, and trade tokenized securities . . . should consider the nature of these securities and the resulting securities laws implications” and that “a token that does not provide the holder with legal and beneficial ownership of the underlying security could be a ‘security-based swap.’”
New Developments Outside the U.S.
ESMA Prepares for Switch Toward Single Volume Cap in October 2025. On July 24, ESMA announced an update of the volume cap system, which will pass from the previous double volume cap mechanism to a “single” volume cap mechanism (“VCM”) in October, according to the changes introduced by the Markets in Financial Instruments Regulation Review. The new VCM limits at 7% the trading volume under the reference price waiver in the EU, compared to the total aggregated trading volume in the EU over the last 12 months for each equity and equity-like financial instrument. [NEW]
ESAs Publish Guide on DORA Oversight Activities. On July 15, the European Supervisory Authorities (“ESAs”) published a guide on oversight activities under the Digital Operational Resilience Act (“DORA”). The aim of this guide is to provide an overview of the processes used by the ESAs through the Joint Examination Teams to oversee critical Information and communication technology third party service providers (“CTPPs”). This guide provides high-level explanations to external stakeholders regarding the CTPP Oversight framework. Furthermore, it provides an overview of the governance structure, the oversight processes, the founding principles and the tools available to the overseers.
ESMA Publishes Guidelines for Assessing Knowledge and Competence of Staff at Crypto-Asset Service Providers. On July 11, ESMA published guidelines specifying the criteria for assessing the knowledge and competence of staff at crypto-asset service providers (“CASPs”) who provide information or advice on crypto-assets and services under the Markets in Crypto-Assets Regulation (“MiCA”). The guidelines will apply six months after translation into all EU languages and publication on ESMA’s website. Within two months of the date of publication of the guidelines on ESMA’s website in all EU official languages, competent authorities to which these guidelines apply must notify ESMA whether they comply, do not comply, but intend to comply, or do not comply and do not intend to comply with the guidelines.
ESMA Warns Investors of Unregulated Crypto Products. On July 11, ESMA issued a public statement warning investors of the ‘halo effect’ that can lead to overlooking risk when authorized CASPs offer both regulated and unregulated products and/or services. The statement also reminds CASPs of the issues that they should consider when providing unregulated products and services, and recommends that they should be particularly vigilant about avoiding any client confusion regarding the protections attached to unregulated products and/or services. According to ESMA, to avoid any misunderstanding CASPs should clearly communicate the regulatory status of each product or service in all client interactions and at every stage of the sales process. In addition, ESMA reminded crypto-assets entities of their obligation to act fairly, professionally and in the best interests of their clients, ensuring that all information, including marketing communications, is fair, clear and not misleading.
ESMA Identifies Opportunities to Strengthen MiCA Authorizations. On July 10, ESMA published the results of a peer review looking at the authorization of Crypto Asset Service Providers in Malta under MiCA. The peer review analyzes the approaches adopted by the Malta Financial Services Authority and provides recommendations to strengthen those processes. According to ESMA, it identifies overall a good level of resources and supervisory engagement within the authority, with some areas for improvement related to the assessment of authorizations.
New Industry-Led Developments
ISDA CEO Issues Comment on Strengthening DC Governance. On July 23, ISDA CEO Scott O’Malia offered an informal comment on the role of Credit Derivatives Determinations Committees (“DCs”). He announced the formation of a governance committee that will be responsible for overseeing the operation of the DCs and making changes to the DC rules where necessary to ensure long-term viability and meet market expectations for efficiency and transparency in credit event determinations. [NEW]
ISDA and CSA Issue Notification of Significant Error or Omissions Suggested Operational Practices. On July 22, ISDA and the Canadian Securities Administrators (“CSA”) developed a Suggested Operational Practices that considered current institutional processes and outlined suggested operational practices related to the new requirement under §26.3(2) of the Canadian Trade Repositories and Derivatives Data Reporting rules rewrite. This is intended to notify a Canadian regulator of a significant error or omission with respect to derivatives data. [NEW]
ISDA Announces Paper on UPI Identifiers for MIFID Transaction Reporting. On July 22, ISDA announced a paper (titled UPI as the Foundation for OTC Derivatives Reporting: The Case for UPI) that it submitted to the UK Financial Conduct Authority on July 16. The paper was developed to complement ISDA’s response to the FCA’s discussion paper DP24/2: Improving the UK Transaction Reporting Regime, which is intended to improve transaction reporting under the UK Markets in Financial Instruments Regulation. [NEW]
ISDA Releases Report on Interest Rate Derivatives Trading Activity Reported in EU, UK and US Markets: First Quarter of 2025. On July 21, ISDA released a report that analyzed interest rate derivatives trading activity reported in Europe. The analysis is based on transactions publicly reported by 30 European approved publication arrangements and trading venues. [NEW]
ISDA Launches Notices Hub and Protocol to Streamline Delivery and Receipt of Critical Notices. On July 17, ISDA launched the ISDA Notices Hub and the ISDA 2025 Notices Hub Protocol, giving users a faster and more efficient method for delivering critical notices and reducing the uncertainty and risk of losses that can result from delays. The ISDA Notices Hub is a secure online platform provided by S&P Global Market Intelligence that enables fast delivery and receipt of termination notices and waivers and ensures address details for physical delivery are updated centrally.
ISDA Responds to Voluntary Carbon and Nature Markets Consultation. On July 10, ISDA responded to the UK government’s consultation on voluntary carbon and nature markets. ISDA recommends that the UK continues to play a leading role in promoting the consistent legal treatment of carbon credits internationally, with the development of global standards currently underway. The response identifies several key barriers to participation in the voluntary carbon markets and recommends ways to solve them.
ISDA Responds to ESMA MiFIR Review Consultation. On July 8, ISDA announced that it submitted a response to ESMA’s fourth package of Level 2 consultation under the Markets in Financial Instruments Regulation Review (“MiFIR”), on transparency for derivatives, package orders and input/output data for the derivatives consolidated tape. In the response, ISDA said that it argues against ESMA’s proposal to use a modified International Securities Identification Number as the identifier for those over-the-counter (“OTC”) derivatives in scope for transparency, and reiterated its longstanding view that the unique product identifier is the correct identifier for OTC derivatives. ISDA also noted that the response also strongly opposes the assessment of single name credit default swaps referencing global systemically important banks as liquid, and proposes a modified deferral framework for these contracts. ISDA stated that the response generally supports the deferral framework for interest rate derivatives, but notes that any benefit gained from the inclusion of basis swaps, forward rate agreements and forward starting swaps is disproportionate to the effort of including them, due to the very small numbers of these instruments that will be in scope of transparency under MiFIR.
ISDA Updates Canadian Transaction Reporting Party Requirements Guidance. On July 8, the ISDA updated its Canadian Transaction Reporting Party Requirements document to account for the Canadian OTC derivatives rule amendments going live on July 25, 2025. According to ISDA, the purpose of the document is to provide a method for a single reporting party determination that can be incorporated by reference in a written agreement in compliance with the Canadian Reporting Rules where the Canadian Reporting Rules otherwise provide for two reporting parties.
The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, Karin Thrasher, and Alice Wang*.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Derivatives practice group, or the following practice leaders and authors:
Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)
Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)
Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)
Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)
Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)
Adam Lapidus, New York (212.351.3869, alapidus@gibsondunn.com )
Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)
William R. Hallatt, Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )
David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)
Marc Aaron Takagaki, New York (212.351.4028, mtakagaki@gibsondunn.com )
Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)
Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)
Alice Yiqian Wang, Washington, D.C. (202.777.9587, awang@gibsondunn.com)
*Alice Wang, a law clerk in the firm’s Washington, D.C. office, is not admitted to practice law.
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