SEC Proposes Adding EU Debt to Foreign Government Futures Exemption

The Securities and Exchange Commission on August 28, 2026, proposed amendments to Rule 3a12-8 under the Securities Exchange Act of 1934 that would add the debt obligations of the European Union to the list of foreign government debt obligations designated as “exempted securities” solely for the purposes of futures marketing and trading, the agency announced.

Under the proposal, futures contracts on EU debt obligations would fall under the exclusive jurisdiction of the Commodity Futures Trading Commission, consistent with the regulatory treatment already afforded to futures on the debt obligations of several EU member states currently listed under the rule. The offerings of the underlying debt obligations themselves would remain subject to the federal securities laws.

What the Proposal Would Change

Rule 3a12-8 designates debt obligations issued by certain foreign governments as exempted securities under the Exchange Act solely for the purposes of the offer, sale, or confirmation of sale of futures contracts on those securities in the United States or to U.S. persons. Because the statutory definition of “security future” excludes a contract of sale for future delivery of an exempted security, futures on the debt of the designated governments are excluded from the security futures regime, which is subject to the joint jurisdiction of the SEC and the CFTC, and are instead regulated as futures under the Commodity Exchange Act.

The proposing release, Release No. 34-106225 (File No. S7-2026-29), states that the rule currently covers the debt of twenty-one countries, eleven of which are EU member states: France, Austria, Denmark, Finland, the Netherlands, Germany, Ireland, Italy, Spain, Belgium, and Sweden. The Commission adopted the rule in 1984 to designate debt obligations of the United Kingdom and Canada as exempted securities for futures trading purposes, and its most recent prior modification added Sweden in 1999.

The proposed amendments would expand the rule’s definition of “Designated Foreign Government Securities” to include a debt obligation of the EU, and would add a definition of that term: “debt that is issued by the European Commission on behalf of the European Union where the borrowings are direct and unconditional obligations of the European Union.” The existing substantive requirements and provisions of the rule would be left unchanged, including its application to the foreign governments currently listed.

Under the rule’s existing definitions, which the release states would apply to EU debt obligations, a qualifying foreign futures contract must be traded on or through a board of trade and must require delivery outside the United States, including any of its possessions or territories. The underlying securities must not be registered under the Securities Act of 1933 nor be the subject of any registered American depositary receipts.

Basis for the Proposal

The release states that futures on EU debt obligations are currently treated as security futures, and that U.S. persons may access them only through the conditional pathway established by a 2009 exemptive order, which is generally limited to qualified institutional buyers and certain intermediaries acting on their behalf. The release describes that pathway as one of the only currently available pathways for U.S. persons to trade futures on debt issued by the EU.

The Commission stated that the proposal is intended to increase U.S. persons’ access to the market for these products, which it said may improve opportunities for hedging, lower transaction costs, contribute to greater market depth, reduce operational friction, and increase competition. The release notes that in March 2026 the CFTC and the SEC entered into a Memorandum of Understanding regarding harmonization in areas of common regulatory interest.

The release cites several factors supporting inclusion. U.S. prudential regulators assign a zero percent risk weight to exposures to the European Commission, the same percentage assigned to an exposure directly and unconditionally guaranteed by the U.S. government, and the European Central Bank assigns EU bonds to the same haircut category as sovereign bonds. According to figures in the release, the EU had 702 billion euros of bonds outstanding in 2025 and raised 153 billion euros through long-term issuance, with close to 37 billion euros of EU bills outstanding in mid-December 2025, up from 23 billion euros at year-end 2024. Citing International Capital Market Association data, the release states that EU bonds ranked seventh by notional value of trades across EU and UK markets in the first half of 2025, with turnover of 1,145.8 billion euros and a 3.1 percent market share, and that the average trade size for EU bonds in that period was approximately 12.1 million euros. The release also states that the eleven member states already included in the rule collectively accounted for more than 80 percent of the EU’s aggregate GDP in 2025.

The Commission’s economic analysis states that the proposed amendment is not expected to impose direct compliance costs on exchanges or market participants, because it permits rather than requires the activity to which it applies. The release also identifies potential costs, including the possibility that liquidity could decrease for futures on EU bonds if new trading venues increase fragmentation without a corresponding increase in trading volume, and that cross-jurisdiction surveillance could become more difficult if U.S. futures exchanges begin trading futures on EU bonds.

“For too long, gaps like this one—where the debt of several EU member states was covered but debt of the European Union itself was not—have created exactly the kind of inconsistency that breeds confusion rather than confidence in the markets,” said SEC Chairman Paul S. Atkins. “This proposal is harmonization in practice and builds on our efforts with the CFTC to preserve investor protection while closing regulatory gaps.”

According to the fact sheet published with the proposal, trading of futures contracts on EU debt obligations in the U.S. or by U.S. persons would, if the amendments are adopted, be governed solely by the Commodity Exchange Act, provided the futures contracts meet the other provisions in the rule.

The proposing release is published on SEC.gov and will be published in the Federal Register. The public comment period will remain open for 60 days after the date of publication in the Federal Register. The release includes 17 specific requests for comment, including questions on the proposed definition of EU debt obligations, the factors used to assess liquidity and credit worthiness, and whether the rule should be repealed or expanded to additional EU member states.