On 24 March 2026, the European Commission published a draft implementing regulation proposing the stand-alone suspension of the derivative trading obligation (DTO) under Regulation (EU) No 600/2014 (MiFIR). The draft targets four major EU financial counterparties and applies exclusively to the United Kingdom market — a direct response to the structural fragmentation created by Brexit in OTC derivatives trading.
This article examines the legal basis, the affected institutions, the evidence framework, and the practical implications for compliance and risk teams at financial institutions operating across EU and UK venues.
Background: the derivative trading obligation and post-Brexit fragmentation
Article 28 of MiFIR requires financial counterparties subject to the clearing obligation under EMIR (Regulation (EU) No 648/2012) to trade certain OTC derivatives only on regulated markets, multilateral trading facilities (MTFs), organised trading facilities (OTFs), or third-country venues recognised as equivalent. This is the derivative trading obligation.
Following the United Kingdom’s withdrawal from the EU, UK trading venues lost their equivalence recognition. As a result, EU-authorised financial counterparties have been unable to execute transactions in DTO-covered derivatives on UK venues — even where they had historically been active market makers serving non-EEA clients through those platforms. This created a structural gap: EU firms with legitimate cross-border business found themselves shut out of a significant liquidity pool, while non-EEA counterparties without EEA trading venue membership had reduced access to EU liquidity providers.
To address this, Regulation (EU) 2024/791 — part of the broader MiFID II / MiFIR review package — introduced a new Article 32a into MiFIR. This provision empowers the Commission to suspend the DTO on a case-by-case basis for specific financial counterparties, upon request from a national competent authority, provided that defined conditions are met.
Timeline of events
Which financial counterparties are affected?
The draft regulation names four EU-authorised financial counterparties. Three were put forward by France’s Autorité des Marchés Financiers (AMF) and one by Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).
BNP Paribas is the only counterparty covered under both suspension pathways. Its Article 32a(1)(b) suspension covers own-account trading of credit default swaps on UK-based dealer-to-dealer venues.
Two suspension pathways under Article 32a
The regulation establishes two distinct legal bases for suspending the DTO, each with its own evidentiary requirements.
Applies to all four counterparties. The competent authority must demonstrate that the financial counterparty: (1) regularly acts as a market maker in OTC derivatives subject to the DTO, and (2) regularly receives requests for quotes (RFQs) for those derivatives from non-EEA counterparties which have no active membership on an EEA trading venue. The suspension allows these firms to respond to such RFQs on UK venues — restoring a liquidity channel cut off by Brexit.
Applies to BNP Paribas only. The competent authority must demonstrate that the financial counterparty: (1) regularly acts as a market maker in credit default swaps subject to the DTO, (2) intends to trade those CDS on own account on UK dealer-to-dealer venues open only to CCP clearing members, (3) intends to trade with counterparties that are market makers without active EEA dealer-to-dealer venue membership, and (4) clears the CDS through a CCP authorised or recognised under EMIR. Notably, the AMF confirmed there is currently no dealer-to-dealer venue in the EEA offering CDS subject to the DTO.
Evidence framework: how conditions were demonstrated
The Annex to the draft regulation sets out the evidence provided by the AMF and BaFin across several dimensions. For market-making activity, the competent authorities provided written confirmations that each counterparty is a participant on EU MTFs and on US swap execution facilities (SEFs) recognised as equivalent under MiFIR Article 28. They also submitted trading data showing that each firm regularly received RFQs and executed transactions in DTO-covered derivatives between 2021 and 2024.
For the non-EEA RFQ requirement, the competent authorities faced a structural challenge: since EU firms cannot currently trade DTO derivatives on non-equivalent third-country venues (including the UK), they cannot directly demonstrate receipt of RFQs from non-EEA counterparties on those venues. To address this, the AMF and BaFin presented pre-Brexit trading data (2018–2020) showing active participation on UK venues, post-2021 evidence of continued activity on UK venues in non-DTO derivatives, and RFQ data from US SEFs showing interactions with non-EEA counterparties not present on EEA venues.
All four counterparties also committed to implementing compliance procedures to ensure that, when operating under the suspension, they would exclusively respond to RFQs from non-EEA counterparties without active EEA venue membership. These measures include client domicile verification during onboarding, confirmation from EEA venues that non-EEA clients are not active members, and providing competent authorities with a full list of non-EEA counterparties they intend to trade with.
Safeguards and review mechanism
The draft regulation includes several mechanisms to ensure the suspension does not undermine the broader MiFIR framework. The Commission confirmed that the clearing obligation under EMIR Title II will continue to apply to all transactions executed under the suspension — meaning these trades remain subject to central clearing regardless of venue.
| Safeguard | Description |
|---|---|
| Periodic review | Commission reviews suspension grounds every five years from entry into force |
| Ongoing monitoring | Competent authorities must regularly monitor compliance and notify the Commission of any breaches without delay |
| Revocation power | Commission may revoke suspension for any counterparty that no longer meets Article 32a conditions |
| Due process | Before revocation, the competent authority has six weeks to submit a reasoned response |
| Clearing obligation | EMIR clearing requirements remain fully applicable to all trades under the suspension |
Practical implications for market participants
For the four named counterparties, this regulation — once adopted — would restore their ability to provide liquidity to non-EEA clients on UK trading venues for DTO-covered derivatives. This has tangible commercial value: the trading data in the Annex shows that some of these firms were handling hundreds of RFQs daily on UK venues before Brexit, activity that has been frozen since 2021.
For other EU financial counterparties not named in this draft, the regulation establishes a clear procedural template. Any firm seeking a similar suspension would need its national competent authority to compile a comparable evidence package — demonstrating market-making activity, non-EEA counterparty demand, and robust compliance controls — and submit it to the Commission for review. ESMA consultation would follow.
For non-EEA counterparties, particularly those active on UK venues, the suspension would expand their access to EU-based liquidity providers for interest rate swaps, credit default swaps, and other DTO-covered instruments. However, these benefits apply only to counterparties without active membership on EEA venues — a condition that will be actively monitored.
At Generation Impact Global, we track regulatory developments across SFDR, MiFIR, EMIR, and the broader EU sustainable finance and capital markets framework. Operational compliance with evolving disclosure obligations and trading rules increasingly depends on robust data management infrastructure that can adapt to new regulatory requirements as they emerge.
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Frequently asked questions
What is the derivative trading obligation under MiFIR?
The derivative trading obligation (DTO) requires certain EU financial and non-financial counterparties to trade specific OTC derivatives only on regulated markets, MTFs, OTFs, or third-country venues recognised as equivalent under Article 28 of Regulation (EU) No 600/2014. It was introduced to increase transparency and shift OTC derivatives trading onto regulated platforms.
Why is the Commission suspending the DTO for UK venues specifically?
Since Brexit, UK trading venues are no longer recognised as equivalent under MiFIR Article 28. This means EU counterparties cannot execute DTO-covered derivatives on UK venues, even though they were historically active there. The suspension addresses this specific gap for firms that can demonstrate ongoing market-making activity and demand from non-EEA counterparties.
Has this regulation been formally adopted?
No. As of March 2026, this is a draft implementing regulation. It has not been adopted or endorsed by the European Commission. The views expressed are preliminary views of the Commission services. It will enter into force on the third day after publication in the Official Journal of the EU, once formally adopted.
Can other EU financial counterparties apply for a similar suspension?
Yes. Article 32a of MiFIR provides a general mechanism. Any national competent authority can submit a suspension request to the Commission on behalf of a financial counterparty within its jurisdiction, provided it can demonstrate compliance with the conditions in Article 32a(1). The process requires ESMA consultation and evidence comparable to that submitted by the AMF and BaFin in this draft.
Does the suspension affect the clearing obligation?
No. The Commission explicitly confirmed that the clearing obligation under EMIR Title II continues to apply in full. All transactions executed under the DTO suspension must still be cleared through an authorised or recognised CCP. The suspension only concerns the venue on which the trade is executed, not the post-trade clearing requirement.
