Derivatives, Legislative and Regulatory Weekly Update (June 27, 2025)
Client Alert | June 27, 2025
From the Derivatives Practice Group: This week, ESMA was active with a number of releases while the CFTC’s Division of Market Oversight extended its no action position to certain non-U.S. swap dealers concerning certain swap reporting requirements Part 45 and Part 46 of the CFTC’s regulations.
New Developments
CFTC Staff Issues No-Action Letter to MIAX Futures Exchange, LLC. On June 25, the Division of Market Oversight (“DMO”) of the CFTC issued a no-action letter stating that it will not recommend enforcement action against MIAX Futures Exchange, LLC (“MIAX”) for temporarily providing for the trading of MIAX’s Minneapolis Hard Red Spring Wheat options on futures exclusively through block trades due to the lack of availability of an electronic trading system, subject to certain conditions set forth in the letter. The DMO stated that it believes the temporary no-action positions are warranted to provide participants in the market with a means to trade out of or offset their open positions in certain expirations when electronic trading is no longer available [NEW]
CFTC Staff Issues No-Action Letter Extension Regarding Non-U.S. Swap Dealers. On June 23, the DMO of the CFTC issued a no-action letter extending the no-action position of CFTC Letter No. 22-14 concerning certain swap reporting requirements of Part 45 and Part 46 of the CFTC’s regulations (the “Amended SDR Reporting Rules”). The letter applies to non-U.S. swap dealers (“SDs”) and non-U.S. major swap participants (“MSPs”) established under the laws of Australia, Canada, the European Union, Japan, Switzerland or the United Kingdom, that are not part of an affiliated group in which the ultimate parent entity is a U.S. swap dealer, U.S. major swap participant, U.S. bank, U.S. financial holding company or U.S. bank holding company. According to the letter, the DMO will not recommend enforcement action against such an entity for failure to comply with the Amended SDR Reporting Rules with respect to its swaps with non-U.S. counterparties that are not guaranteed affiliates, or conduit affiliates, of a U.S. person, until the earlier of: (a) 30 days following the issuance of a comparability determination by the CFTC with respect to the Amended SDR Reporting Rules for the jurisdiction in which the non-U.S. SD or non-U.S. MSP is established, and (b) the applicable compliance date of a CFTC action addressing such obligations. [NEW]
U.S. Senate Passes GENIUS Act. On June 16, the Senate passed the bipartisan Guiding and Establishing National Innovation for US Stablecoins Act, or GENIUS Act, in a 68-30 vote. If passed in the House, the GENIUS Act would establish the first federal rules for regulating stablecoins, a type of digital asset pegged to the value of another asset, oftentimes the U.S. dollar. The GENIUS Act now heads for a vote in the House.
Former CFTC Chairman William Bagley Dies at 96. On June 16, CFTC acting Chairman Caroline D. Pham released a statement on the passing of the Hon. William T. Bagley, the CFTC’s first chairman. Appointed to the position by President Gerald Ford, William Bagley served as the Chairman of the CFTC from 1975 to 1978. He passed away on June 9, 2025 at his home in San Rafael, California.
New Developments Outside the U.S.
ESMA Narrows Down Scope of CSDR Cash Penalties Trading. On June 26, ESMA published a final report that specifies the scope of Central Securities Depositories Regulation (“CSDR”) cash penalties which the agency describes asin an effort to support its simplification and burden reduction initiative in post-trading. ESMA provided technical advice to the European Commission on the scope of settlement discipline that it said is in line with the revised settlement discipline framework set out in CSDR Refit, identifying (1) the causes of settlement fails that are considered as not attributable to the participants in the transaction, and (2) the circumstances in which operations are not considered as trading. ESMA also identified a broad range of scenarios that would not trigger CSDR cash penalties. [NEW]
ESMA Provides Advice on Eligible Assets for UCITS. On June 26, ESMA published its advice to the European Commission on the review of the Undertakings for Collective Investment in Transferable Securities (“UCITS”) Eligible Assets Directive (“EAD”). The EAD is an implementing directive providing clarification on the assets a UCITS can invest in. ESMA said that it provided in the Technical Advice a comprehensive assessment of the EAD’s implementation across Members States and made proposals to ensure regulatory clarity and uniformity across jurisdictions. [NEW]
ESMA Suggests Amendments to the DLT Pilot Regime to Make It Permanent. On June 25, ESMA published a report on the Distributed Ledger Technology (“DLT”) Pilot Regime. ESMA also provided an overview of the EU market for authorized DLT market infrastructures and recommendations on how to expand participation in the DLT Pilot Regime. ESMA indicated that the report contained information about business models, types of DLT financial instruments offered, and technical or legal issues encountered by supervisors to date. ESMA also said that it analysed exemptions requested by DLT market infrastructures and the conditions under which National Competent Authorities have granted those exemptions. [NEW]
ESMA Provides Guidance on Key Tool for CCP Resolution. On June 25, ESMA published its first central counterparties (“CCPs”) resolution briefing, which it said aims to support National Resolution Authorities (“NRAs”) on the operationalization of the cash call mechanism. The briefing, developed by ESMA’s CCP Resolution Committee, provides a methodology to be considered by NRAs when including the resolution cash call in CCP resolution plans. [NEW]
ESMA Consults on Margin Transparency and Cost of Clearing. On June 24, ESMA launched two public consultations following the review of the European Market Infrastructure Regulation (“EMIR 3”). ESMA encouraged stakeholders to share their views about (1) the type of information to be disclosed by clearing service providers (“CSPs”) to their clients, and (2) the requirements regarding CCPs’ margin simulation tool and CSPs’ margin simulations, as well as the type of information to be provided by CCPs and CSPs regarding their margin models. [NEW]
ESMA Invites Feedback on How to Simplify Funds’ Data Reporting. On June 23, ESMA launched a discussion paper to gather feedback and inputs on how to integrate funds reporting, aiming to reduce the burden for market participants. The discussion paper outlines options for improving different aspects of reporting, such as the scope of data, reporting processes and systems to ensure more efficient reporting and sharing of data between the authorities. [NEW]
ESMA Calls for Input on Streamlining Financial Transaction Reporting. On June 23, ESMA launched a call for evidence to gather feedback on opportunities to simplify, better integrate and streamline supervisory reporting. ESMA said that it aims to identify how best to enhance efficiency and reduce the costs associated with supervisory reporting while maintaining a strong level of transparency and ensuring effective oversight from the authorities. [NEW]
ESMA Puts Forward Q&A on Shared Order Book Model Under MiCA. On June 20, ESMA published a new Q&A on the non-compliance of the shared order book model with the Markets in Crypto-Assets Regulation (“MiCA”). The Q&A addressed the model where two or more crypto-asset platforms merge their individual order books into a single, unified order book from which orders are matched. ESMA clarified that where such a model involves non-EU trading platforms, it breaches the authorization requirements under MiCA. [NEW]
ESMA Publishes Final Report on Active Account Requirement Under EMIR 3. On June 19, ESMA published its final report on the Regulatory Technical Standards specifying the conditions under which the active account requirement should be met, as mandated under EMIR 3. ESMA has streamlined the operational conditions and the stress-testing in response to feedback to its public consultation.
ESMA Consults on Methodology for Computing EU Member States’ Market Capitalization and Market Capitalization Ratios. On June 19, ESMA announced that it is consulting on the methodology for calculating market capitalization and market capitalization ratios, as mandated by the Directive on faster and safer relief of excess withholding taxes. The proposed methodology is aligned with existing transparency frameworks and uses transaction data reported under the Regulation on markets in financial instruments.
ESMA Appoints Ante Žigman to Management Board and Appoints New Chairs to Two Standing Committees. On June 18, ESMA appointed Ante Žigman as a new member of its Management Board. The election took place at the Board of Supervisors meeting in Warsaw on June 17, and he will take up his position on 6 July 2025.
New Industry-Led Developments
ISDA Publishes Paper on Developments in Interest Rate Derivatives Markets in Mainland China and Hong Kong. On June 24, ISDA published a research paper that analyzes interest rate derivatives (“IRD”) trading activity reported in mainland China and Hong Kong. Key highlights from the report include that (1) China’s renminbi (“RMB”)-denominated IRD market has expanded significantly since 2022 and that (2) the share of RMB-denominated IRD traded notional in Hong Kong overall grew to 10.2% in 2024. [NEW]
ISDA, SIFMA Comments on Stress Capital Buffer Requirement Proposal. On June 23, ISDA and the Securities Industry and Financial Markets Association (“SIFMA”) submitted a comment letter on a proposal by the Federal Reserve Board of Governors to revise its capital plan rule and stress capital buffer requirement (“SCB”). In the letter, ISDA and SIFMA commended the Board for initiating efforts to address longstanding and unwarranted volatility of the SCB, primarily by averaging SCB results over a two-year period. However, the letter notes the proposal fails to address more fundamental drivers of SCB volatility, including the implausibility of the supervisory stress scenarios and the overlap with the risk-based capital framework. [NEW]
ISDA Publishes Position Paper on SFDR Review. On June 23, ISDA and the Association for Financial Markets in Europe published a position paper on the review of the Sustainable Finance Disclosure Regulation (“SFDR”). ISDA said that the paper acknowledges that the SFDR needs to be revised in line with the objectives of the sustainability omnibus to streamline the EU sustainable finance framework and address the implementation challenges experienced by market participants. The paper sets out several priorities, including streamlining disclosure requirements to focus on information most essential for investors and transitioning to a product categorization system while minimizing market disruption. [NEW]
ISDA Publishes Research Note on Interest Rate Derivatives Trading in the US, EU and UK. On June 18, ISDA published a research note that analyzes changes in interest rate derivatives trading activity in the US, EU and UK from 2021 to 2024. It examines how central bank interest rate policies influenced IRD trading volumes and how the composition of interest rate derivatives products has evolved due to the transition to alternative reference rates.
ISDA Responds to ESMA on Clearing Threshold Regime. On June 16, ISDA responded to ESMA’s consultation on the new clearing threshold regime. The new regime, based on uncleared positions, was introduced in the context of EMIR 3. In the response, ISDA comments on the data analysis provided by ESMA, the interaction with the active account requirements, in particular condition 2 of EMIR 3 Article 7a(1), and proposes an implementation approach suitable for financial and non-financial counterparties, in line with the European Union’s broader simplification and burden reduction agenda.
ISDA Launches Pre-adherence Period for Notices Hub. On June 12, ISDA began a pre-adherence process for the ISDA Notices Hub. The new protocol will change all agreements between adhering firms to allow them to use the ISDA Notices Hub – a secure online platform managed by S&P Global Market Intelligence that will enable the instantaneous delivery and receipt of termination notices and waivers ISDA has begun a pre-adherence process for the ISDA Notices Hub, enabling firms to sign up to a free protocol that will allow them to use the new platform when it launches on July 15.
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, [email protected])
Michael D. Bopp, Washington, D.C. (202.955.8256, [email protected])
Michelle M. Kirschner, London (+44 (0)20 7071.4212, [email protected])
Darius Mehraban, New York (212.351.2428, [email protected])
Jason J. Cabral, New York (212.351.6267, [email protected])
Adam Lapidus, New York (212.351.3869, [email protected] )
Stephanie L. Brooker, Washington, D.C. (202.887.3502, [email protected])
William R. Hallatt, Hong Kong (+852 2214 3836, [email protected] )
David P. Burns, Washington, D.C. (202.887.3786, [email protected])
Marc Aaron Takagaki, New York (212.351.4028, [email protected] )
Hayden K. McGovern, Dallas (214.698.3142, [email protected])
Karin Thrasher, Washington, D.C. (202.887.3712, [email protected])
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