Financial Services Regulation & Compliance - Investment Firms Oct 2017
European Banking Authority (EBA) issues Opinion on the design of a new prudential framework for investment firms
The EBA has published its Opinion on the design and calibration of a new prudential framework for investment firms, tailored specifically to the needs of investment firms' different business models and inherent risks. The Opinion covers the design and calibration of capital and liquidity requirements, consolidated supervision, reporting requirements, the suitability of the proposed framework for commodity derivatives firms and the need of macroprudential tools. The opinion contains recommendations concerning the applicability of the remuneration requirements and corporate governance rules to investment firms laid down in the CRD IV and CRR. It includes a number of recommendations which aim to develop a single and harmonised set of requirements that are simple, proportionate and relevant to the nature of investment firms authorised to provide MiFID services and activities.
ESMA issued its Final Report on Draft Regulatory Technical Standard (RTS) on the trading obligation for derivatives under MiFIR
The final report presents the revised draft RTS specifying the trading obligation for derivatives (TO) for classes of interest rate swaps (IRS) and credit default swaps (CDS) as foreseen in Articles 28 and 32 of Regulation (EU) No 600/2014 of the European Parliament and the Council on markets in financial instruments. The final report explains the revised approach taking into account the feedback received to the September 2016 discussion paper and June 2017 consultation paper. ESMA’s draft RTS was submitted to the European Commission (EC) on 28 September 2017 for its endorsement. The EC has three months to decide whether to endorse the draft RTS.
European Securities and Markets Authority updates Questions and Answers on MiFID II and MiFIR market structures topics
ESMA has updated its Q&A on MiFID II and MiFIR. The updated Q&As relate to the following topics:
- Direct Electronic Access (DEA) and algorithmic trading
- the tick size regime
- multilateral and bilateral systems
European Securities and Markets Authority updates Questions and Answers on MiFID II and MiFIR transparency topics
ESMA has updated its Q&A on MiFID II and MiFIR transparency topics. The updates include Q&As on the following:
general Q&As on transparency topics
- non-equity transparency
- pre-trade transparency waivers
- the double volume cap mechanism
- the systematic internaliser regime
European Securities and Markets Authority updates Questions and Answers on MiFID II and MiFIR investor protection and intermediaries topics
ESMA has updated its Q&A on MiFID II and MiFIR investor protection and intermediaries topics. The updated Q&As relate to the following topics:
- Best Execution
- recording of telephone conversations and electronic communication
- post-sale reporting
- information on costs and charges
- client categorisation
The Q&A will continue to be updated by ESMA in the coming months, before the 3 January 2018 implementation date.
European Securities and Markets Authority updates Questions and Answers regarding the implementation of MiFID II.
ESMA updated its Q&A regarding the implementation of MiFID II. The updated Q&As include new answers to questions regarding the following:
- market structure issues
- transparency issues
European Securities and Markets Authority issues Questions and Answers on MiFID II implementation for post-trading issues
ESMA has issued Q&As on post-trading issues regarding the implementation of MiFID II and MiFIR. The Q&A includes the topic of pre-trade checks waiver.
European Securities and Markets Authority launches key MiFID II and MAR financial instrument reference database
ESMA has launched the second phase of its Financial Instrument Reference Database (FIRDS). The launch involves providing access to the database containing the currently available reference data that will enable market participants to identify instruments subject to MAR and MiFID II/ MiFIR reference data reporting requirements.
Article 27 of MiFIR and related technical standards impose obligations on trading venues and systematic internalisers to submit reference data from 3 January 2017 for the relevant financial instruments to NCAs who will then transmit it to ESMA for publication. The launch of ESMA's second phase of its FIRDS will allow market participants to prepare their reporting systems in order to fulfil their reporting obligations to national competent authorities ahead of the 3 January 2018 go-live date. Instructions on how to access the data and download the relevant machine-readable files has also been published.
FAQs on MiFID II - Interim Transparency Calculations
ESMA updated its FAQs and answers regarding the publication of MiFID II Transitional Transparency Calculations for all non-equity instruments in accordance with RTS 2 regulatory technical standards on transparency requirements in respect of bonds, structured finance products a, emission allowances and derivatives under MiFIR.
European Securities and Markets Authority agrees MiFID II position limits proposed by FCA
ESMA has published nine opinions on position limits regarding commodity derivatives under MiFID II and MiFIR. The opinions agree nine position limits as proposed by the FCA which are:
- London cocoa
- Rubusta coffee
- white sugar
The proposed position limits were found to be consistent with the objectives established in MiFID II and the methodology developed for setting those limits. The limits will apply to the net position a person can hold in commodity derivative contracts from 3 January 2018.
A list of liquid contracts will also be published by ESMA which will receive a bespoke position limit. ESMA will continue to assess the notifications received and issue opinions to ensure position limits are set in accordance with MiFID II framework.
Guidelines compliance table - Guidelines on the calibration of circuit breakers and publication of trading halts under MiFID II
ESMA has published a table outlining the competent authorities that comply or intend to comply with ESMA Guidelines on 3 January 2018.
Article 16(3) of the ESMA Regulation requires national competent authorities to inform ESMA whether they comply or intend to comply with each Guideline or recommendation issued. If a competent authority does not comply or does not intend to comply it must inform us of the reasons. ESMA decide on a case by case basis whether to publish the reasons.
European Securities and Markets Authority highlights preparations for MiFID II and Brexit as key issues at ECON hearing
The Chair of ESMA, Steven Maijoor, delivered a statement discussing ESMA's work in preparation for the implementation of MiFID II. He discussed how the implementation of MiFID II highlights the need for a single rulebook to be complemented by supervisory convergence measures. Therefore, ESMA has issued various Opinions, guidelines and Q&As over the last 12 months.
Mr Maijoor also spoke about the ESMA's work in preparing for the withdrawal of the UK from the EU. He discussed the various Opinions issued by ESMA in this regard, one general one and three sector-specific ones for investment firms, secondary markets and asset management, and tackled key aspects of outsourcing and delegation to third countries. In publishing the Opinions they relied strictly on EU legislation and aimed at providing appropriate guidance to NCAs.
Further, Mr Maijoor discussed 3rd country related issues and whether the 3rd country equivalence model is fit for purpose. He stated that ESMA has begun work on reviewing its Guidelines for Endorsement of 3rd country Credit Rating Agencies but some significant legislative changes need to be considered.
Commission publishes Delegated Regulation (EU) 2017/1946 supplementing MiFID I and MiFID II
This Delegated Regulation sets out rules on the information to be included by a proposed acquirer in the notification of a proposed acquisition to the competent authorities of the investment firm in which the acquirer is seeking to acquire or increase a qualifying holding ('target entity') for the assessment of the proposed acquisition.
Commission publishes Implementing Regulation (EU) 2017/1945 in relation to MiFID II
The Commission publishes Regulation (EU) 2017/1945 which lays down implementing technical standards with regards to notifications by and to applicant and authorised investment firms according to MiFID II.
Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013
The European Commission updated a proposal for a Regulation amending Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms along with a proposal for a Regulation laying down common rules on securitisation and creating a European framework for simple, transparent and standardised securitisation which was first published on 30 September 2015. The aim of the two proposals is to restart European securitisation markets in a sustainable way, in order to improve the financing of the EU economy, while ensuring financial stability and investor protection, and to revise accordingly the regulatory framework on capital charges for exposures to securitisations.
For further information please contact a member of the Financial Regulation team.
Date Published: 8 November 2017