Financial Services Regulation and Compliance Bulletin - Investment Firms May 2019
DOMESTIC
Speech by Michael Hodson, Director of Asset Management and Investment Banking on reflections on Brexit, insights on supervision and enhancing diversity
On 14 May 2019, Michael Hodson delivered a speech at an event celebrating the 20th anniversary of the euro in which he discussed the current state of play of Brexit and the remaining risks and the use of secondments in this context. He further discussed developments in supervision and policy including: outsourcing; CP86; the Asset Segregation Regulations; CP119; the Benchmarks Regulation; and the new prudential regime for investment firms (which was agreed in April by the EU Parliament). He concluded with some thoughts on diversity and noted that the CBI is working to maintain the pressure on firms to ensure diversity in senior roles.
EUROPEAN
MiFID II: ESMA makes new bond liquidity data available
On 1 May 2019, ESMA made available the third quarter liquidity assessment for bonds subject to the pre-trade and post-trade requirements, imposed by MiFID II and MiFIR. The transparency requirements for bonds which are deemed liquid as at 1 May 2019 will apply until the fourth quarter which commences on 15 August 2019.
ESMA consults on periodic reporting rules for trade repositories
On 23 May 2019, ESMA published a consultation paper relating to guidelines on the different categories of information it expects to be submitted periodically by trade repositories (TRs) to ESMA, in its role as supervisor of TRs. The consultation closes on 27 August 2019, and ESMA will then consider the feedback with a view to finalising the proposed guidelines and publishing a report in Q4 of 2019.
ESMA updates its opinion on ancillary activity calculations
On 27 May 2019, ESMA published an updated opinion on ancillary activity calculations providing an estimate of the size of the market on commodity derivatives and emission allowances for 2018. Under MiFID II, market participants are required to measure their own activity against total market sizes in these areas to determine whether they exceed the activity thresholds and consequently would have to apply for authorisation as an investment firm by the CBI.
Consultation Paper on Guidelines on periodic information and notification of material changes to be submitted to ESMA by Trade Repositories
On 27 May 2019, ESMA published draft guidelines setting out the information to be periodically submitted by trade repositories (TRs) to ESMA, which clarified the format and frequency of the information ESMA can expect to receive in its role as supervisor of such TRs under EMIR. The consultation will close on 27 August 2019.
Consultation paper - Guidelines for reporting under Articles 4 and 12 of the Securities Financing Transaction Regulation (SFTR)
On 27 May 2019, ESMA published draft guidelines on how to report securities financing transactions. These guidelines included general principles applicable to SFT reporting, the construction of the reports and where these reports should be sent. The consultation will close on 29 July 2019.
Regulation (EU) 2019/834 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 648/2012 (EMIR REFIT) (EMIR 2.1)
On 28 May 2019, the EMIR Refit Regulation was published in the Official Journal of the EU and it will enter in to force on 17 June 2019. Whilst the majority of provisions will enter in to force immediately, other provisions will enter on a phased approach. The EMIR Refit Regulation amends EMIR with regards to (among other things):
- extending the definition of financial counterparties to include investment firms falling within MiFID II, central securities depositories, securitisation SPVs, and AIFs and UCITS
- risk management procedures for uncleared derivatives
- the reporting of financial counterparties on behalf of non-financial counterparties falling below the clearing threshold
- the small financial counterparties clearing exemption
- the removal of the requirement to report intragroup transactions in certain circumstances
ESMA consults on tiering, comparable compliance and fees under EMIR 2.2
On 28 May 2019, ESMA published three consultation papers under EMIR 2.2 on tiering, comparable compliance and fees. EMIR 2.2 enhances the recognition regime for central counterparties (CCPs) and amends EMIR's regulatory and supervisory regime for CCPs. The consultation papers discuss (among other things):
- the various indicators which can be used in ESMA's assessment of a third country central counterparty (TC–CCP)
- the assessment of comparable compliance by ESMA
- the fees for Tier 1 Tier 2 TC-CCPS, the determination of fees for one-off recognition and the appropriate budgeting approach to be used in the consultation paper
This consultation will close on 29 July 2019.
Decision of Japan EMIR Equivalence enters in to force
On 22 May 2019, the EU Commission Implementing Decision (EU) 2019/684 of 25 April 2019 entered in to force. The Implementing Decision relates to the recognition of the legal, supervisory and enforcement arrangements of Japan for derivatives transactions supervised by the Japan Financial Services Agency as equivalent to the valuation, dispute resolution and margin requirements of Article 11 of the EMIR Regulation.
For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.
Date published: 7 June 2019