Key Takeaways
- • The Managed Funds Association (MFA) urged the SEC to finalize its proposal placing futures on European Union (EU) bonds under the sole oversight of the CFTC, according to a comment letter submitted to the regulator.
- • Futures on EU debt currently face dual oversight by the SEC and CFTC, which limits who can trade them; the proposal would remove the SEC layer.
- • The same treatment already applies to government bond futures for 11 EU member states, which MFA says are comparable to EU debt in size, liquidity, and credit quality.
- • The change would broaden access beyond qualified institutional buyers and certain intermediaries, allowing investors to hedge EU debt exposure directly.
- • The underlying EU bonds would remain subject to federal securities laws.
Summary
The Managed Funds Association (MFA) has urged the Securities and Exchange Commission (SEC) to finalize its proposal to move futures on European Union (EU) bonds under the sole oversight of the Commodity Futures Trading Commission (CFTC). The position was set out in a comment letter the trade group submitted to the SEC.
At present, EU debt futures are subject to dual oversight by the SEC and CFTC, a structure that restricts which market participants can trade them. Futures on government bonds from large, liquid markets generally fall under CFTC regulation alone, on the basis that such markets are difficult to manipulate. That treatment already applies to bonds issued by 11 EU member states. MFA argues that EU debt is now comparable to those markets in size, liquidity, and credit quality, and that the SEC's proposal would extend the same regulatory treatment to it.
Jennifer Han, MFA Chief Legal Officer, described the change as a "common-sense" step that advances the SEC and CFTC's work to reduce regulatory overlap. "EU debt has the liquidity and creditworthiness of Europe's major government bonds, and the rules should treat it the same," Han said. "This change will give American investors better tools to manage risk and greater access to an important global market."
According to MFA, the proposal would open EU bond futures to a broader range of market participants, since access is currently largely limited to qualified institutional buyers and certain intermediaries. Broader access would allow investors to hedge EU debt exposures directly rather than relying on imperfect substitutes, and would add depth and competition to European markets. The underlying EU bonds would remain subject to federal securities laws.
MFA, which represents the global alternative asset management industry and has more than 180 fund manager members, frames the proposal as a reduction in regulatory overlap that benefits US investors seeking risk management tools.
At present, EU debt futures are subject to dual oversight by the SEC and CFTC, a structure that restricts which market participants can trade them. Futures on government bonds from large, liquid markets generally fall under CFTC regulation alone, on the basis that such markets are difficult to manipulate. That treatment already applies to bonds issued by 11 EU member states. MFA argues that EU debt is now comparable to those markets in size, liquidity, and credit quality, and that the SEC's proposal would extend the same regulatory treatment to it.
Jennifer Han, MFA Chief Legal Officer, described the change as a "common-sense" step that advances the SEC and CFTC's work to reduce regulatory overlap. "EU debt has the liquidity and creditworthiness of Europe's major government bonds, and the rules should treat it the same," Han said. "This change will give American investors better tools to manage risk and greater access to an important global market."
According to MFA, the proposal would open EU bond futures to a broader range of market participants, since access is currently largely limited to qualified institutional buyers and certain intermediaries. Broader access would allow investors to hedge EU debt exposures directly rather than relying on imperfect substitutes, and would add depth and competition to European markets. The underlying EU bonds would remain subject to federal securities laws.
MFA, which represents the global alternative asset management industry and has more than 180 fund manager members, frames the proposal as a reduction in regulatory overlap that benefits US investors seeking risk management tools.
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