Derivatives, Legislative and Regulatory Weekly Update (March 14, 2025)

Client Alert | March 14, 2025

From the Derivatives Practice Group: This week, the Acting Chairman Caroline D. Pham announced a 30-day compliance and remediation initiative for investigations and matters that do not involve customer harm or abuse.

New Developments

CFTC Staff Withdraws Advisory on Swap Execution Facility Registration Requirement. On March 13, the CFTC Division of Market Oversight (“DMO”) announced it is withdrawing CFTC Letter No. 21-19, Staff Advisory Swap Execution Facility (“SEF”) Registration Requirement, effective immediately. As stated in the withdrawal letter, DMO determined to withdraw the advisory since it has created uncertainty regarding whether certain entities are required to register as SEFs. [NEW]
Acting Chairman Caroline D. Pham Delivers Keynote Address at FIA BOCA50. On March 11, Acting Chairman Caroline D. Pham announced a new 30-day compliance and remediation initiative or enforcement sprint. This initiative involves review of the CFTC’s currently open investigations and enforcement matters regarding compliance violations, such as recordkeeping, reporting or other compliance violations without customer harm or market abuse. The CFTC will seek to expeditiously resolve these matters in the next 30 days to conserve the CFTC’s resources and free up Division of Enforcement staff to pursue fraudsters and scammers and seek recoveries for victims, whether through disgorgement, restitution, or other measures. [NEW]
SEC Crypto Task Force to Host Roundtable on Security Status. On March 3, the SEC announced that its Crypto Task Force will host a series of roundtables to discuss key areas of interest in the regulation of crypto assets. The “Spring Sprint Toward Crypto Clarity” series will begin on March 21 with its inaugural roundtable, “How We Got Here and How We Get Out – Defining Security Status.” The SEC indicated that initial roundtable on March 21 is open to the public, will be held from 1 p.m. to 5 p.m. at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C and that the primary discussion will be streamed live on SEC.gov, and a recording will be posted at a later date. The SEC also noted that information regarding the agenda and roundtable speakers will be posted on the Crypto Task Force webpage.
CFTC Commissioner Christy Goldsmith Romero to Step Down from the Commission and Retire from Federal Service. On February 26, Commissioner Christy Goldsmith Romero announced she is stepping down from the Commission and will retire from federal service. Commissioner Romero extended gratitude towards President Biden for her nomination, the U.S. senate for its unanimous confirmation, and her current and former staff and CFTC for their public service.
CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation. On February 25, the CFTC’s Division of Enforcement issued an Advisory on how the Division will evaluate a company’s or individual’s self-reporting, cooperation, and remediation when recommending enforcement actions to the Commission and establishes the factors the Division will consider. This marks the first time the Division will use a matrix to determine the appropriate mitigation credit to apply. Commissioner Kristin N. Johnson released a statement that “any effort to adopt new reporting processes, particularly processes that require inter-division guidelines and infrastructure, must be consistent with the mandates of [the CFTC]” and consequently, that she does not support the Advisory. Additional information regarding the Advisory can be found in our client alert.

New Developments Outside the U.S.

The ESAs Acknowledge the European Commission’s Amendments to the Technical Standard on Subcontracting Under the Digital Operational Resilience Act. On March 7, the European Supervisory Authorities (EBA, EIOPA and ESMA – the “ESAs”) issued an opinion on the European Commission’s (“EC”) rejection of the draft Regulatory Technical Standard (“RTS”) on subcontracting. The EC indicated that it rejected the original draft RTS on subcontracting, which specified further elements that financial entities must determine and assess when subcontracting ICT services that support critical or important functions under the Digital Operational Resilience Act (“DORA”), on the grounds that certain elements exceeded the powers given to the ESAs by DORA. The opinion acknowledges the assessment performed by the EC and opines that the amendments proposed ensure that the draft RTS is in line with the mandate set out under DORA. The ESAs said that, for this reason, they do not recommend further amendments to the RTS in addition to the ones proposed by the EC. The ESAs encouraged the EC to finalize the adoption of the RTS without further delay as submitted to the ESAs.
EC Publishes Sustainability Omnibus Package. On February 26, the EC published the sustainability omnibus package and accompanying Q&A, alongside the Clean Industrial Deal communication and investment simplification package. ISDA said that the proposals are intended to simplify sustainability reporting and due diligence, as well as reduce administrative burdens on companies. The EC has also launched a consultation until March 26 on draft amendments to the Taxonomy Disclosures delegated act, including, inter alia, the suspension of the Trading Book Key Performance Indicator to 2027. The EC also proposed to delay the Corporate Sustainability Due Diligence Directive (“CSDDD”) transposition deadline and application date by one year to July 26, 2027 and 2028 respectively. Other CSDDD proposals include the removal of the EC review clause to evaluate whether additional due diligence requirements should be imposed on the provision of financial services and investment activities by July 26, 2026, the removal of the EU-wide harmonized civil liability regime and the deletion of the requirement to terminate business relationships. The EC’s proposed changes to the Carbon Border Adjustment Mechanism (“CBAM”) regulation include an exemption for small importers of CBAM goods and a postponement of the obligation for importers to purchase CBAM certificates to February 1, 2027. The Clean Industrial Deal further notes that the EC is working on a CBAM review report that will assess the functioning of the mechanism and potential scope extension to other emissions trading system sectors which will be presented in the autumn, followed by a legislative proposal in early 2026. The proposed amendments to the Corporate Sustainability Reporting Directive, CSDDD and CBAM will now be considered for adoption by the European Parliament and the Council.

New Industry-Led Developments

ISDA Expands SwapsInfo to Include European CDS Trading Activity. On March 13, ISDA announced that it has expanded its SwapsInfo derivatives database and website to include European credit default swaps (“CDS”) trading activity, creating a more comprehensive picture of derivatives trading in the EU, UK and US. The new data includes EU and UK index and single-name CDS traded notional and trade count, based on transactions publicly reported by 18 European approved publication arrangements and trading venues. [NEW]
ISDA Submits Paper to ESMA on OTC Derivatives Identifier for MIFIR Transparency. On March 11, ISDA submitted a paper to ESMA setting out its view on how the delegated act specifying the identifying reference data to be used for over-the-counter (“OTC”) derivatives transparency under the Markets in Financial Instruments Regulation (“MIFIR”) should be implemented. The delegated act leaves room for interpretation by ESMA on which unique identifier should be used, creating a risk that the International Securities Identification Number may be retained in some form. The ISDA paper makes the case for the use of the unique product identifier (“UPI”), maintaining its position that this will create more effective transparency and a more attractive consolidated tape, as well as reducing cost and complexity, and aligning with the increasing international consensus on using the UPI as the basis for OTC derivatives identification. [NEW]
ISDA Responds to FSB Consultation on Leverage In NBFI. On February 28, ISDA responded to the Financial Stability Board’s (FSB) consultation on leverage in the non-bank financial intermediation (NBFI) sector. ISDA made the following points: overly prescriptive regulatory recommendations for all NBFI-sector firms across all geographies and market sectors could be inappropriate; the ways in which the use of leverage in the NBFI sector would create financial stability risks deserve further examination; ISDA believes the FSB should undertake a deeper analysis of the impact of the proposed measures on the cost of hedging, market liquidity and liquidity needs in times of stress; and the FSB should account for how the use of derivatives and secured financing, which the FSB characterizes as leverage-inducing activities, support key functions performed by financial markets, including: financing, hedging, price discovery, and market stabilization through countercyclical behaviors.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, and Karin Thrasher.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Derivatives practice group, or the following practice leaders and authors:

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Adam Lapidus, New York (212.351.3869, alapidus@gibsondunn.com )

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

William R. Hallatt, Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )

David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)

Marc Aaron Takagaki, New York (212.351.4028, mtakagaki@gibsondunn.com )

Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.

Derivatives, Legislative and Regulatory Weekly Update (March 14, 2025)

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