The United States Securities and Exchange Commission (SEC) has proposed a rule amendment to include the EU-issued debt instruments in the list of exempted securities of Rule 3a12-8 of the Securities and Exchange Act. If adopted, futures contracts linked to such obligations would be more clearly placed under the exclusive supervision of the United States Commodity Futures Trading Commission (CFTC).

Revision of EU Debt Futures Focus

The proposal was published on 28 August with the aim of filling a gap in the existing rules. According to the SEC, sovereign debt issued by EU member States is now included in the relevant arrangement, but the debt issued at the EU level is not treated in the same way.

The proposed amendments would allow EU debt to be regulated in the same way as EU member State debt in the relevant futures operations. However, the scope of application is limited to the marketing and trading chain of futures contracts and does not involve the direct issuance, sale or offer of the EU debt itself.

The regulatory division of labour will be clearer

This means that EU debt products at the spot level will continue to be subject to the United States Federal Securities Act and will not be transferred from the SEC regulatory framework as a whole as a result of this revision.

The SEC states that the regulatory attribution of the relevant futures contracts will be clearer when EU debt is included in Rule 3a12-8. Futures products linked to such debts would then fall under the exclusive jurisdiction of the CTC.

According to the Chairman of the SEC, Paul S. Atkins, the existing rules differ in the treatment of the debts of EU member States and of the EU itself, which can easily lead to unnecessary confusion in the market. He described this adjustment as a concrete implementation of the regulatory coordination between SEC and CFTC.

60-day consultation period

At the same time, it was stressed that the proposal was a targeted revision and would not change the rest of Rule 3a12-8.

The proposal will be published in the Federal Gazette and then formally entered into the public consultation process. Market participants, financial institutions and other interested parties will have 60 days to submit their comments, and the SEC will then decide whether to proceed with the final revision.

At present, this proposal has not changed the current rules immediately. The adjustment will take effect only after public comments have been completed and finally adopted by the SEC.