Financial Service Regulation and Compliance - Investment Firms January 2019
CBI publishes update to its Q&As on Investment Firms
The CBI published its update to its Q&As on Investment Firms. The Q&A sets out answers to queries which may arise in relation to the Central Bank Investment Firms Regulations, MiFID II and MiFIR. It is published in order to assist in limiting uncertainty. It is not relevant to assessing compliance with regulatory requirements. The update pertains to the International Organization of Securities Commissions (IOSCO) Memorandum of Understanding (MoU). The CBI confirmed that the IOSCU MoU satisfies the requirements set out in Regulation 5(5)(b) of the Markets in Financial Instruments Regulations 2017.
ESMA updates Q&As on Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) transparency topics
ESMA has updated its Q&As regarding transparency issues under the MiFID II and MiFIR. The new Q&As provide clarification on the publication of request for market data (RFMD) transactions, default transparency regime for equity instruments and default LIS and SSTI thresholds for bonds. The purpose of these Q&As is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR. They provide responses to questions posed by the general public and market participants in relation to the practical application of level 1 and level 2 provisions relating to transparency and market structures issues.
ESMA updates its Q&As on MiFID II and MiFIR commodity derivatives topics
ESMA has updated its Q&As regarding MiFID II and MiFIR commodity derivatives topics. These Q&As provide clarification on issues related to the MiFID II/MiFIR regime for commodity derivatives, including on position limits, position reporting and ancillary activity. ESMA clarifies that the correct application of the field price multiplier when reporting electricity contracts. This is in order to mitigate the risk of different contracts receiving the same International Securities Identification Number.
European Council agrees position on new regulatory and supervisory framework in relation to Investment Firms
On 7 January 2019, EU ambassadors endorsed the Council's position on a package of measures, composed of a regulation and a directive, setting out a new regulatory framework for investment firms. The European Council is making the rules applicable to investment firms more proportionate to the level of risk which they take. The texts define prudential requirements and supervisory arrangements that are adapted to investment firms' risk profile and business model while ensuring financial stability.
Until now, all investment firms have been subject to the same capital, liquidity and risk management rules as banks. The capital requirements regulation and directive (CRR/CRD4) are based on international standards intended for banks and they do not fully take into account the specificities of investment firms. On the basis of the text agreed, investment firms would be subject to the same key measures, as regards capital holdings, reporting, corporate governance and remuneration. However the set of requirements they would need to apply would be differentiated according to their size, nature and complexity. Negotiations between the Council and the Parliament are ready to start.
ESMA issues latest double volume cap data
ESMA has updated its public register with the latest set of double volume cap (DVC) data under MiFID II. The updates include DVC data and calculations for the period of 1 December 2017 to 30 November 2018 as well as updates to already published DVC periods. The number of new breaches is 53: 40 equities for the 8% cap, applicable to all trading venues, and 13 equities for the 4% cap, that applies to individual trading venues.
Trading under the waivers for all new instruments in breach of the DVC thresholds should be suspended from 14 January 2019 to 13 July 2019. The instruments for which caps already existed from previous periods will continue to be suspended. In addition, ESMA highlighted that some trading venues in the meantime have submitted corrected data that affects past DVC publications. For two instruments, this means that the previously identified breach of the cap proved to be incorrect and the suspensions of trading under the waivers should be lifted.
ESMA updates commodity derivatives transitional transparency calculations for MiFID II/ MiFIR
ESMA has published an updated version of the MiFID II/MiFIR transitional transparency calculations (TTC). The update relates to the transitional transparency calculations for commodity derivatives and only affects electricity derivatives. For sub-classes that used to be liquid and are now illiquid: the updated results can be applied immediately; and for sub-classes that used to be illiquid and are now liquid: trading venues are invited to contact their national competent authority to agree on a reasonable application date as the change in liquidity status may require adjusting their trading systems.
For further information please contact a member of the Financial Regulation team.
Date published: 12 February 2019