The SEC has proposed exempting European Union debt from futures registration requirements, opening a 60-day comment period. The change would place qualifying EU debt futures under the CFTC's exclusive jurisdiction while leaving the underlying debt offerings subject to federal securities law.
SEC targets a regulatory gap for EU debt
The U.S. Securities and Exchange Commission proposed a rule amendment on Aug. 28 that would add debt issued by the European Union to the foreign government securities covered by Rule 3a12-8 of the Securities Exchange Act of 1934. The rule already covers government debt issued by countries including the United Kingdom, Canada, Japan, Australia, France, Germany, Italy and Spain. Separately, eleven EU member states are included in the rule, but debt issued by the EU as an institution is not.
According to SEC Chairman Paul Atkins: "harmonization in practice", building on the agency's work with the Commodity Futures Trading Commission. Under the proposed definition, an EU debt obligation would need to represent a direct and unconditional obligation issued by the European Commission on behalf of the European Union.
Futures would fall under CFTC jurisdiction
If adopted, qualifying futures contracts tied to EU debt could be offered, sold or confirmed in the United States under the same framework used for the eleven member states already in the rule. The Commodity Futures Trading Commission would hold exclusive jurisdiction over those contracts, while offerings of the underlying debt would remain under federal securities requirements.
The exemption would not extend beyond futures marketing and trading. Contracts would still need to meet Rule 3a12-8's existing conditions, including trading on a board of trade and satisfying the rule's foreign delivery, clearing and offset requirements.
Comment period opens alongside other crypto rulemaking
The SEC will publish the proposed release in the Federal Register before accepting public comments for 60 days, asking market participants to address investor access, available information and possible costs. The agency is separately advancing other rulemaking, having sent proposed crypto custody amendments to the White House Office of Management and Budget on Aug. 25.
Source: U.S. Securities and Exchange Commission
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