Differences in EU / US approach


Whilst the wider context of the US and EU legislative approach is derived from the same G20 Pittsburgh agreement, the two jurisdictions have inevitably put in place sets of legislation that are predicated by local politics. The end result is a set of aligned legislation that has very different implementations and related details. For any institution that is operating across multiple jurisdictions this represents a significant challenge.

Some illustrative differences are:

Reporting
  • US reporting is by a single counterparty to a trade, the 'senior' in a published hierarchy of client type
  • EU reporting is by both counterparties although a counterparty may employ a third party to report on their behalf
  • US requires that each counterparty is identified using a unique identifier (LEI)
  • EU has a similar LEI requirement, however the format differs to the US definition
Clearing
  • Clearing in the US is via a Futures Commission Merchant (FCM) who is obliged to offer a Legal Segregation Operational Commingling account
  • Clearing in the EU has to offer a choice of separate account or omnibus accounts
Trading
  • All trades which are mandated to clear in the US must also have traded via a SEF, with the Made Available for Trade definitions being handed down from the regulators
  • In the EU the requirements vary between the clearing mandate and the trading mandate (e.g. Liquidity definitions will be different for clearing and trading)
  • Also in the EU there is a choice of trading mechanism (MTF, OTF, SI) depending on the nature of the trade, which is not available in the US

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