Key Takeaways
- • The Managed Funds Association, representing the global alternative asset management industry, has backed an SEC proposal to add the European Union to a four-decade-old list of exempted issuers, according to Bloomberg.
- • The move would ease restrictions on US investor access to the EU's new bond futures market.
- • Under current rules, security futures are jointly regulated by the SEC and the Commodity Futures Trading Commission, while futures on certain exempted government bonds fall exclusively under CFTC jurisdiction.
- • The proposed exemption would remove EU bond futures from the SEC-CFTC joint framework that currently constrains US participation.
Summary
The Securities and Exchange Commission should add the European Union to a four-decade-old list of exempted issuers, a change that would ease restrictions on US investor access to the bloc's new bond futures market, according to Bloomberg. The recommendation came from the Managed Funds Association, a US-based group that represents the global alternative asset management industry.
In a letter to the SEC, the Managed Funds Association said it supports a proposal to exempt the EU from rules governing security futures. Such contracts are jointly regulated by the SEC and the Commodity Futures Trading Commission, whereas futures on certain exempted government bonds fall exclusively under CFTC jurisdiction. Placing EU bond futures in the exempted category would align them with the treatment of those government bond futures and reduce the regulatory friction facing US market participants.
For hedge funds and other alternative managers, the proposal matters because it would broaden the set of instruments available for sovereign rate and duration exposure to the euro area. The source does not specify a timeline for an SEC decision or the contract specifications of the EU bond futures market.
In a letter to the SEC, the Managed Funds Association said it supports a proposal to exempt the EU from rules governing security futures. Such contracts are jointly regulated by the SEC and the Commodity Futures Trading Commission, whereas futures on certain exempted government bonds fall exclusively under CFTC jurisdiction. Placing EU bond futures in the exempted category would align them with the treatment of those government bond futures and reduce the regulatory friction facing US market participants.
For hedge funds and other alternative managers, the proposal matters because it would broaden the set of instruments available for sovereign rate and duration exposure to the euro area. The source does not specify a timeline for an SEC decision or the contract specifications of the EU bond futures market.
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