The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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UK 2025 Regulatory Initiatives Grid published
14 April 2025
The Financial Services Regulatory Initiatives Forum (the Forum) has published the Regulatory Initiatives Forum Grid (the Grid), with the UK Financial Conduct Authority (FCA) also updating its webpage. The previous Grid was due to be published in May 2024 but was postponed due to the General Election, meaning the Forum published only an interim update in October 2024.
The 2025 Grid sets out the regulatory pipeline for the next 24 months and reflects the reprioritisation that has taken place since the new government came into power. Notable initiatives include:- motor finance commission review: the FCA intends to confirm, within six weeks of the Supreme Court's decision on past use of discretionary commission arrangements by motor finance firms, whether it will propose a redress scheme;
- liquidity risk management in funds: the FCA will consult on refined proposals regarding liquidity risk management in funds to implement FSB and IOSCO guidelines;
- Consumer Composite Investments (CCI) Regulation: the FCA published a second consultation paper on the new CCI regime on 16 April (see our update) and plans to issue a Policy Statement with final rules in late 2025;
Topics : Client Asset Protection, Conduct and Culture, Consumer / Retail, Financial Crime and Sanctions, Financial Market Infrastructure, FinTech, Fund Regulation, MiFID II, Operational Resilience, Other Developments, Payment Services and Payment Systems, Prudential Regulation, Recovery and Resolution, Securities -
ESMA final report on systematic internaliser ITS, volume cap and transparency calculations and trading venue RTS
10 April 2025
The European Securities and Markets Authority (ESMA) has published a final report in relation to certain changes being made as a result of the MiFID II/MiFIR review, together with an accompanying press release. The changes covered by this final report were part of the third consultation package following the MiFID II/MiFIR review, and relate to:- A new set of implementing technical standards for investment firms notifying competent authorities when it gains the status of systematic internaliser or decides to opt-in to the systematic internaliser regime. ESMA confirmed that it is making some changes to the original proposals, including reducing the number of reporting fields in the notification template to ease the reporting burden and extending the notification period from two weeks to 20 calendar days. ESMA also confirmed it will discuss with competent authorities areas where further guidance is required.
Read more. -
ESMA final report on order execution policy technical standards
10 April 2025
The European Securities and Markets Authority (ESMA) has published a final report in relation to the draft regulatory technical standards (RTS) specifying criteria for establishing and assessing the effectiveness of investment firms' order execution policies, accounting for whether the orders are executed on behalf of retail or professional clients. The report is accompanied by a press release. ESMA's mandate for developing the new RTS was included as part of the changes made to best execution requirements following the EU MiFID II/MiFIR review. During the review, areas for improvement were identified including insufficiently documented and demonstrated satisfaction of best execution processes. In addition, feedback from competent authorities and other stakeholders evidenced that further clarification of order execution policy requirements would be helpful.
Read more.Topic : MiFID II -
ESMA calls for clarity on the qualification of fractional shares
9 April 2025
The European Securities and Markets Authority (ESMA) has published a letter to the European Commission on the inconsistent regulation of trading of fractional shares across the EU. There has been an increase in the significance of fractional shares, which accounted for more than 10% of the total number of transactions reported in 2023-2024. However, shares and fractional shares are not uniformly defined under the Markets in Financial Instruments Directive (MiFID II) or the Markets in Financial Instruments Regulation (MiFIR), resulting in regulatory inconsistencies across the EU. ESMA states that while it has already taken action through its 2023 public statement to protect retail investors, uncertainty continues. The inconsistent treatment of fractional shares has the following key effects: (i) it impacts transparency and reporting requirements, (ii) it affects compliance with the MiFID systematic internaliser and share trading obligation rules; and (iii) it impacts the calculation of thresholds for data reporting services providers derogation criteria. ESMA believes consistent classification would help create a level playing field for firms and support retail participation in this market segment. ESMA suggests it would be beneficial to clarify that fractional shares, which replicate the key characteristics and trading environment of shares, should remain subject to the MiFIR rules for shares. -
ESMA publishes technical advice on research provisions under MiFID Delegated Directive
8 April 2025
The European Securities and Markets Authority (ESMA) has published a final report setting out its technical advice to the European Commission on the amendments to the research provisions in the context of the Listing Act legislative package. The Listing Act amended the EU requirements in the Markets in Financial Instruments Directive (MiFID II) on how payments are made for investment research, enabling joint payments for execution services and research for all issuers, irrespective of the market capitalisation of the issuers covered by the research. EU firms will be permitted to choose whether to make joint or separate payments for third-party research and execution services. This follows the UK's approach which resulted in amended rules taking effect in August 2024. We discuss UK changes in our note, "UK allows bundled payments for third-party research and trading commissions." EU member states will have until 4 June 2026 to transpose the Listing Act changes to MiFID II. ESMA's advice relates to the changes to Article 13 of Commission Delegated Directive (EU) 2017/593, known as the MiFID II Delegated Directive, which sets out the conditions that firms have to meet under the regime that required unbundled payments for research. ESMA proposes that where an investment firm chooses to use a separate research payment account, most of the existing conditions should continue to apply. Where an investment firm pays jointly for execution services and research, ESMA's advice is to require those firms to enter into an agreement on joint payments that (i) prevents the investment firm from paying substantially more for the research component than would be the case if the firm paid directly for the research; and (ii) does not impede the firm's ability to comply with the best execution requirements.Topic : MiFID II -
ESMA MiFIR review consultation package on derivatives transparency, package orders and CTP data
3 April 2025
The European Securities and Markets Authority (ESMA) has launched its consultation in relation to derivatives transparency, package orders, and input and output data for consolidated tape providers (CTPs). This is the fourth ESMA consultation package under the EU's MiFIR review workstream, and proposes a new standalone set of regulatory technical standards (RTS) for derivative transparency ahead of a future comprehensive recast of the current RTS on non-equity transparency (RTS 2). It also includes draft amends to the respective RTS for package orders and data for CTPs. ESMA proposes a new derivatives transparency regime as per the new scope defined by MiFIR, which was amended so that the regime applies to derivatives based on certain characteristics rather than simply delineating between those traded on- and off-venue. The consultation sets out detailed calibrations as to liquidity determination (relevant for both pre-trade transparency waivers and post-trade deferrals), and the size thresholds, and duration periods to be used for the new deferral regime. The deadline for comments is 3 July. ESMA will then publish its final report, and submit the technical standards to the European Commission in Q4. -
UK FCA policy statement on the DTO and PTRR services
3 April 2025
The UK Financial Conduct Authority (FCA) has published its policy statement (PS25/2) with final rules on the classes of derivatives subject to the derivatives trading obligation (DTO) and the new framework for the exemptions for post-trade risk reduction services (PTRR) in respect of the DTO, best execution and transparency. The original DTO and PTRR proposals were consulted on in July 2024, with an earlier consultation in December 2023 including proposals in relation to post-trade transparency for derivatives.
Read more.Topic : MiFID II -
ESMA update on consolidated tape provider for bonds
2 April 2025
The European Securities and Markets Authority (ESMA) has issued a press release in preparation for the launch of a consolidated tape for bonds. The selection process for a provider is in motion and ESMA intends to decide on the selected applicant by early July, at which point data contributors should engage with the selected provider in relation to practical and technical matters. There will then be an expedited authorisation process for the selected provider, and when the application is complete, ESMA will determine whether authorisation is to be granted within three months. ESMA also acknowledges that it has the ability to grant a transition period if requested by the applicant, if needed. In terms of the current expected timeline, authorisation of the bond consolidated tape provider is expected in Q3/4, with the launch of the first selection for an equity consolidated tape provider in June, and the launch of the first selection for an over-the-counter derivatives consolidated tape provider in Q1 2026.Topic : MiFID II -
UK HMT publishes draft SI on UK MiFID Org Reg
18 March 2025
HM Treasury (HMT) has published a new webpage with a draft statutory instrument (SI) and policy note on the UK Markets in Financial Instruments Directive Organisational Regulation (UK MiFID Org Reg). The draft SI does not seek to make any policy changes but restates definitions from the UK MiFID Org Reg in UK domestic legislation and makes various consequential changes. The publication of the draft SI follows the UK chancellor's announcement last year of further changes to the UK wholesale markets regulatory framework, which will include the revocation of firm-facing rules within the MiFID Org Reg. These will be replaced in the UK Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) rulebooks. The deadline for comments on the draft SI is 14 April. HMT will then proceed with the restatement of UK MiFID Org Reg definitions, and the revocation of firm-facing rules, to align with the FCA and PRA implementing the new rules in H2 2025.Topic : MiFID II -
UK FCA highlights areas for improvement in private market valuation processes
5 March 2025
The UK Financial Conduct Authority (FCA) has published the findings of the multi-firm assessment of valuation practices and governance for valuing private equity, venture capital, private debt and infrastructure assets. The review covered firms managing funds or providing portfolio management and/or advisory services in the UK for private equity, venture capital, private debt and infrastructure assets. The FCA found that many firms had good practices in valuation processes, including the quality of reporting to investors, documenting valuations, using third-party valuation advisers to introduce additional independence and expertise and consistent application of established valuation methodologies.
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EC consultation on commodity derivatives market
26 February 2025
The European Commission has published a targeted consultation document on a review of the functioning of commodity derivatives markets (including for these purposes emissions allowances) and certain aspects relating to spot energy markets. The outcome of this consultation will feed into the Markets in Financial Instruments Directive report with a view to making the EU commodity derivatives markets more efficient and resilient.
The consultation seeks stakeholders' feedback on a broad range of issues, including: (i) data aspects relating to commodity derivatives; (ii) the ancillary activity exemption; (iii) position management and position reporting; (iv) position limits; (v) circuit breakers; and (vi) other elements stemming from the Draghi report on EU competitiveness. Responses must be submitted by 9 April. -
ESMA publishes SMSG advice on MiFID investment research changes under the EU Listing Act
17 February 2025
The European Securities and Markets Authority (ESMA) published advice from the Securities and Markets Stakeholder Group (SMSG) on the ESMA consultation paper on draft technical advice on investment research. The technical advice relates to changes to the Markets in Financial Instruments Directive (MiFID) regime for investment research in the context of the EU Listing Act legislative package. These changes allow for joint payments to be made for execution services and research, subject to certain conditions. The ESMA consultation paper proposed amendments to article 13 of Directive (EU) 2017/593 (referred to as the MiFID Delegated Directive).
The SMSG advice includes a summary of findings from academic studies on MiFID research provisions, and notes that there has been an improvement in research quality and mitigation of conflicts of interest, but a reduction in the overall quantity of research. The SMSG advice also notes that there has been a shift from traditional sell-side research to sponsored research for SMEs, and that there is a trend among asset managers to continue to pay for research separately (even in circumstances where they would be able to pay for it jointly with other services) due to the operational complexity of running two separate invoicing systems. The deadline for ESMA to deliver its technical advice to the European Commission is 30 April 2025.Topic : MiFID II -
UK FCA webpage on transparency waivers and deferrals updated
14 February 2025
The UK Financial Conduct Authority (FCA) has updated its webpage on transparency waivers and deferrals in light of the upcoming changes to the UK MiFIR transparency regime for bond and derivatives markets. The FCA added a notice to the webpage stating that, before applying, firms may wish to consider the implications of these changes as confirmed in the relevant policy statement, PS24/14. The notice highlights, in particular, the transitional amendments that have been made in respect of voice and request for quote (RFQ) trading systems, which will apply from 31 March 2025 in advance of the new rules, which will come into force on 1 December. The transitional requirement, set out in MAR TP 2 1.4R, confirms that for the period between 31 March 2025 and 30 November 2025, trading venue operators are not subject to certain pre-transparency requirements for non-equity instruments in respect of an RFQ system or voice trading system when operated by the trading venue operator.Topic : MiFID II -
UK Financial Conduct Authority policy statement on reforming commodity derivatives regulatory framework
5 February 2025
The Financial Conduct Authority (FCA) has published a policy statement (PS25/1) on reforming the commodity derivatives regulatory framework. The policy statement sets out the FCA's response to feedback on its consultation paper on the subject (CP23/27) and includes its final rules and guidance to be included in the FCA Handbook. Key changes made in response to the consultation feedback include: Scope of the position limits regime: the regime will be limited to the 14 critical contacts consulted on, including LME Aluminium and LME Tin. However, the approach to contracts that are closely related to these critical contracts but outside the scope of position limits will be less prescriptive than consulted on, allowing trading venues more discretion to calibrate scope. Exemptions: the FCA's proposed requirement for trading venues to only grant the hedging exemption where they are satisfied that the exempt positions can reasonably be managed—the so-called risk management condition—is being amended to be less prescriptive. Non-financial entities will no longer be required to submit a detailed stress test.
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UK Financial Markets Standards Board updated final statement of good practice for front office supervision of wholesale traded markets
January 8, 2025
The Financial Markets Standards Board has published its updated final statement of good practice for front office supervision of wholesale traded markets. The statement of good practice sets out 15 good practice statements, grouped under five themes, to support firms with their approach to supervision of market and client-facing activities. The statement of good practice represents an update to FMSB's original 2017 publication on front office supervision and includes new guidance to help firms meet challenges to supervision that have emerged since then amid evolving regulation, new working practices, and technological change.
Significant updates include good practice guidance around:- Establishing clearer support for the role of a supervision framework.
- Clarifying the concepts of supervision, responsibility and controls.
- Specifying the roles and responsibilities of a supervisor and the standards expected.
- Providing clarity around reasonable spans of supervision.
Topic : MiFID II -
EU launches selection procedure for Consolidated Tape Provider for bonds
31 December, 2024
The European Securities and Markets Authority has launched the first selection procedure for the Consolidated Tape Provider for bonds. The CTP aims to enhance market transparency and efficiency by consolidating trade data from various trading venues into a single and continuous electronic stream. ESMA believes that this consolidated view of market activity should help market participants to access accurate and timely information and make better-informed decisions, leading to more efficient price discovery and trading.
Entities interested in applying are encouraged to register and submit their requests to participate in the selection procedure by February 7, 2025. ESMA will assess the received requests against the exclusion and selection criteria and will invite the successful candidates to submit their application. ESMA intends to adopt a reasoned decision on the selected applicant by early July. The successful applicant will be selected to operate the CTP for a period of five years, and invited to apply for authorization with ESMA without undue delay. Once authorized, the CTP will be supervised by ESMA. Further information about the process is available on the dedicated webpage.Topic : MiFID II -
European Securities and Markets Authority consults on EU code of conduct for issuer-sponsored research
December 18, 2024
The European Securities and Markets Authority has published a consultation on draft regulatory technical standards to establish an EU code of conduct for issuer-sponsored research. When final, the RTS will supplement the revised Markets in Financial Instruments Directive, as amended by the Listing Act Directive, which provides that investment firms distributing to clients or potential clients research that is paid for, fully or partially, by an issuer, is labelled as issuer-sponsored research. Only research that is prepared in accordance with an EU code of practice may be labelled issuer-sponsored research. The code of conduct sets out standards of independence and objectivity for research providers and specifies procedures and measures for the effective identification, prevention, and disclosure of conflicts of interest, with a view to enhancing the trust in and use of issuer-sponsored research.
Read more.Topic : MiFID II -
EU Platform on Sustainable Finance report on categorization of products under Sustainable Finance Disclosure Regulation
December 17, 2024
The EU Platform on Sustainable Finance has published a report on the categorization of products under the Sustainable Finance Disclosure Regulation. The Platform recommends categorizing products with the following sustainability strategies:- sustainable — contributions through Taxonomy-aligned Investments or Sustainable Investments with no significant harmful activities, or assets based on a more concise definition consistent with the EU Taxonomy;
- transition — investments or portfolios supporting the transition to net zero and a sustainable economy, avoiding carbon lock-ins, in line with the European Commission's recommendations on facilitating finance for the transition to a sustainable economy; and
- ESG collection — excluding significantly harmful investments/activities, investing in assets with better environmental and/or social criteria or applying various sustainability features. All other products should be identified as unclassified products.
The Platform recommends evaluating whether the scope of the categorization should go beyond the current SFDR, potentially categorizing all products and services under sustainability preferences in the Insurance Distribution Directive and the Markets in Financial Instruments Directive. The Platform also recommends that the European Commission develops a common understanding on impact investing in the EU sustainable finance framework and how it relates to the EU Taxonomy and thereafter determines how to integrate it in the categorization scheme. -
European Securities and Markets Authority publishes final report on bond transparency and 'reasonable commercial basis' for market data under MiFIR Review
December 16, 2024
The European Securities and Markets Authority has published its final report covering mandates under the MiFIR Review for the review of the regulatory technical standards on transparency requirements for bonds, structured finance products and emission allowances, and the RTS on the "reasonable commercial basis" upon which firms should provide market data.
Regarding the non-equity transparency requirements set out in Commission Delegated Regulation (EU) 2017/583, the draft RTS propose amendments to: (i) the pre-trade transparency requirements, in particular in relation to the definition and characteristics of central limit order books and periodic auctions; (ii) the pre-trade waiver regime; (iii) the deferral regime for bonds, structured finance products, and emission allowances; and (iv) specific transparency fields and flags.
Read more.Topic : MiFID II -
European Securities and Markets Authority publishes final report on equity transparency under revised Markets in Financial Instruments Directive
December 16, 2024
The European Securities and Markets Authority has published a final report, setting out proposals for amendments related to equity transparency under the revised Markets in Financial Instruments Directive. The report includes proposals for the amendment of the regulatory technical standards as well as the technical advice on the provisions on equity transparency, covering: (i) changes to the definition of a liquid market for equity instruments. The new liquidity assessment for shares is now solely based on the market capitalization instead of the free-float; (ii) specification of information to be disclosed for pre-trade transparency purposes, which is also of relevance for the equity consolidated tape; (iii) review of the pre-trade transparency requirements for systematic internalizers, including the calibration of two quoting sizes; and (iv) post-trade transparency reports, including flags for equity instruments. In addition, the proposals include changes related to the discontinuation of reporting of data for the purpose of transparency calculations. Going forward, ESMA will perform these calculations using transaction data reported under Article 26 of MiFIR.
The final report has been submitted to the EC, which has three months to decide whether to endorse the proposed amendments to the RTS. Similar amendments will be proposed in early 2025 for the volume cap mechanism.Topic : MiFID II -
European Securities and Markets Authority publishes final report and technical standards on consolidated tape providers and data reporting service providers
December 16, 2024
The European Securities and Markets Authority has published a final report on new and revised technical standards for consolidated tape providers and other data reporting services providers under the Markets in Financial Instruments Regulation.
The report covers the final regulatory technical standards applicable to CTPs on: (i) data quality and reporting (changes to ESMA's original proposal have been made regarding input data formats, CTPs' responsibilities on input data quality and latency requirements); (ii) revenue redistribution and authorization (refinements from ESMA's original proposal have been made to allow greater flexibility to the CTP when applying the revenue distribution scheme); and (iii) clock synchronization (which largely align with ESMA's original proposal). The report also includes revised Technical Standards on the authorization of DRSPs (which were largely as consulted on).
The final report has been submitted to the European Commission, which has three months to decide whether to endorse the proposed amendments to the RTS.Topic : MiFID II -
European Securities and Markets Authority publishes feedback statement on future selection of consolidated tape provider
December 16, 2024
The European Securities and Markets Authority has published a feedback statement providing an overview of responses received from stakeholders to its public consultation on the future selection of consolidated tape providers. ESMA provides a detailed summary of the feedback collected for each of the selection criteria: (i) governance and organization requirements; (ii) costs, fees, and revenue redistribution; (iii) the ability to process data and dissemination speed; (iv) data quality, modern interface, and record-keeping; and (v) resilience, cyber-risk, and energy consumption.
The final technical specifications will be made publicly available, together with general tendering specifications on the approach and standardized forms, at the launch of each selection procedure. ESMA will launch the selection procedures for the bonds CTP on January 3, 2025, and for the equity CTP in June 2025.Topic : MiFID II -
UK Financial Conduct Authority publishes update on an equity consolidated tape
December 16, 2024
The U.K. Financial Conduct Authority has published a final report commissioned from Europe Economics to evaluate the potential impacts of implementing a pre-trade equities consolidated tape in the U.K., together with an update responding to the findings of the report.
The EE report made a number of findings, including with respect to the usefulness of post-trade data, the institutional and retail use of pre-trade data, the impact of pre-trade data on market resilience, and the licensing of market data. The FCA concludes that there is a strong case for establishing an equities CT (including ETFs) with post-trade data, covering traded prices and volumes, as soon as practicable. Many market participants also think that to reap the full benefits from a CT and ensure it is commercially viable, the inclusion of pre-trade data is necessary. EE's report shows that the demand for a pre-trade CT is dependent on its design features.
The FCA will explore the different policy options for the U.K. equity CT and plans to engage with market participants on potential design options early in 2025, with a view to publishing a consultation paper later in the year. Potential CT providers that wish to participate in the FCA's engagement should respond to the call for interest by January 10, 2025. The FCA has also issued an invitation for potential CT providers to express their interest in providing an equity CT. -
European Securities and Markets Authority publishes final report on amendments to certain technical standards for commodity derivatives
December 16, 2024
The European Securities and Markets Authority has published a final report on proposed amendments to certain MiFID II technical standards in relation to commodity derivatives in response to amendments introduced by the MiFID II review. The final report details the proposed changes to Commission Delegated Regulation (EU) 2022/1299 (RTS on position management controls), Commission Implementing Regulation (EU) 2017/1093 (ITS 4), and Article 83 on position reporting in Commission Delegated Regulation (EU) 2017/565.
Changes relating to commodity derivatives introduced by the MiFID Review include: (i) extending position management controls to trading venues which trade derivatives on emission allowances; (ii) amending the scope of position reporting by excluding emission allowances; and (iii) introducing a new obligation to publish a second weekly position report for trading venues trading options.
The final report has been submitted to the European Commission, which has three months to decide whether to endorse the proposed amendments to the technical standards.Topic : MiFID II -
UK Financial Conduct Authority Begins Process of Appointing a UK Bond Consolidated Tape Provider
December 4, 2024
The U.K. Financial Conduct Authority has announced that it is starting the process of appointing a bond consolidated tape (CT) provider. It has published a concession notice that sets out the FCA's next steps for running the tender process and updated its related information page. By January 31, 2025, the FCA will publish draft tender documents on Atamis, the FCA's procurement portal which will contain details of the award process, the licences the successful bidder will need to provide, how to participate in the tender, and the information that the FCA expects firms to submit as part of the application process. The FCA will also publish a draft contract between the CT provider and the FCA. The CT provider is not required to go live before the bond transparency regime changes take effect on December 1, 2025.Topic : MiFID II -
The Markets in Financial Instruments (Equivalence) (Singapore) Regulations 2024
December 3, 2024
The Markets in Financial Instruments (Equivalence) (Singapore) Regulations 2024 have been published, together with an explanatory memorandum and de minimis assessment. The Regulations set out HM Treasury's determination that Singapore's regulatory and supervisory regime for trading in derivatives continues to be equivalent to the U.K.'s under U.K. MiFIR and allows U.K. counterparties to fulfil their derivatives trading obligation when they trade derivatives instruments on trading venues in Singapore.
Commission Implementing Decision (EU) 2019/541, granting equivalence to Singaporean trading venues became part of assimilated law in the U.K. under the EU Withdrawal Act. However, equivalence applies only to those authorized trading venues listed in the Decision's Annex. Since assimilation, seven additional trading venues have been authorized and therefore the Decision, at the request of the Monetary Authority of Singapore, needs to be re-enacted and updated.
The Regulations come into force on December 31, 2024 and will replace the assimilated implementing decision, which will be revoked at the same time. -
New UK Financial Conduct Authority Direction for the Derivatives Trading Obligation
November 29, 2024
The U.K. Financial Conduct Authority has published a new direction for the U.K. derivatives trading obligation, together with an explanatory memorandum. The FCA's existing direction modifying the U.K. DTO using its Temporary Transitional Power expires on December 31, 2024. This allows firms subject to the U.K. DTO, trading with, or on behalf of, EU clients subject to the corresponding obligation under EU MiFIR, namely the EU DTO to be able to transact or conclude those trades on EU trading venues, providing that certain conditions are met. The purpose of this new direction is to provide continuity in the outcomes achieved through the TTP. In the continuing absence of mutual equivalence between the U.K. and the EU for the purposes of the U.K. DTO and EU DTO, certain market participants would be caught by a conflict of law between the U.K. DTO and EU DTO—in particular branches of EU firms in the U.K.—unless a new direction is issued. The new direction set out the same conditions as the existing direction, however the new direction only applies to derivatives subject to the DTO in both the U.K. and the EU. The new direction takes effect on the expiry of the previous one. -
UK Financial Conduct Authority Consults on the MiFID Organisational Regulation
November 27, 2024
The Financial Conduct Authority has published a consultation paper on the Markets in Financial Instruments Directive Organisational Regulation (MiFID Org Reg). The FCA is consulting on proposals to transfer the firm-facing requirements of the MiFID Org Reg into FCA Handbook rules when HM Treasury commences the repeal of the MiFID Org Reg. The FCA is proposing to retain the current substance of the requirements to provide continuity for firms. Provisions that the FCA is not replacing in regulatory rules will either be restated or repealed by HM Treasury to coincide with the Handbook rules coming into force, and HM Treasury will publish a draft statutory instrument setting out how the Government will deal with the non-firm-facing elements.
The consultation paper also includes a discussion chapter about further reform, either now or in the future, to make the rules better suited to the range of U.K. licensed firms and their clients. This includes in circumstances where the Consumer Duty does not apply. It considers how the FCA could rationalize or improve MiFID II derived conduct and organizational rules, including for Article 3 firms. The FCA also discusses whether and how the client categorization rules could work more effectively.
Read more.Topic : MiFID II -
International Organization of Securities Commissions Report on Principles for the Regulation and Supervision of Commodity Derivatives Markets
November 25, 2024
The International Organization of Securities Commissions has published a report on a targeted implementation review on principles for the regulation and supervision of commodity derivatives markets. In October, IOSCO conducted a targeted implementation review of five selected principles: Principles 9, 12, 14, 15, and 16 that aim to address excessive commodity market volatility, OTC derivatives transparency, and orderly functioning of the commodity derivatives markets. IOSCO believes that an appropriate implementation of the selected principles would help mitigate the impact of external factors which may disrupt commodity markets, as recently experienced. As such the report sets out IOSCO's recommendations to its members for improving the implementation of specific elements of the selected principles, as well as the intention to conduct further work in the OTC markets area.
Overall, the survey results show that the majority of respondents were broadly compliant with the selected principles. However, both regulators and exchanges identified significant challenges in implementing certain elements of the selected principles within OTC markets. Based on the results of the review, IOSCO anticipates additional work related to the issues with the ability of exchanges and certain regulators to collect and aggregate, on both an ad hoc and regular basis, information about OTC positions. The specifics of this work are still being determined, but IOSCO is committed to ensuring that any future developments align with IOSCO's strategic goals. -
International Organization of Securities Commissions' Final Report on Post Trade Risk Reduction Services
November 25, 2024
The International Organization of Securities Commissions has published its final report on post trade risk reduction services. The report highlights potential policy considerations and risks associated with the using and offering of PTRRS and presents seven sound practices in this area as guidance to IOSCO members and regulated users of PTRRS. The seven sound practices cover the following areas: (i) transparency, governance, comprehensibility, and fairness of the algorithm; (ii) operational risk; (iii) data integrity and security and regulatory data; (iv) legal certainty; (v) considerations of potential counterparty risk by IOSCO members and PTRRS users; (vi) market concentration and competition; and (vii) standardization and predictability of runs and file formats. The sound practices are designed to improve and complement existing market practices. The report reflects the results of the public consultation launched in January. -
EU Listing Act Package Published in Official Journal of the European Union
November 14, 2024
The following legislation that comprises the EU Listing Act package has been published in the Official Journal of the European Union:- Regulation (EU) 2024/2809 amending the EU Prospectus Regulation, the EU MAR and EU MiFIR (the "Listing Regulation");
- Directive (EU) 2024/2811 amending MiFID II and repealing Directive 2001/34/EC (the "Listing Directive"); and
- Directive (EU) 2024/2810 on multiple-vote share structures (the "Multiple-Vote Shares Directive").
The Listing Regulation and Directive aim to streamline the rules applicable to companies, particularly SMEs, going through a listing process or companies already listed on EU public markets, by alleviating administrative burdens and costs, while preserving a sufficient degree of transparency, investor protection and market integrity. The Listing Directive also amends the EU requirements on how payments are made for investment research. EU firms will be permitted to choose whether to make joint or separate payments for third-party research and execution services. This follows the U.K. change to its rules, which took effect in August. We discuss the EU and U.K. changes in our note, "UK allows bundled payments for third-party research and trading commissions."
Read more. -
Mansion House 2024
November 14, 2024
Rachel Reeves, the U.K. Chancellor has set out a package of reforms in her Mansion House speech. The reforms aim to drive growth and competitiveness in financial services. Ms. Reeves stated that the regulatory changes post-financial crisis created a system which sought to eliminate risk-taking that 'has gone too far' and has led to unintended consequences. Ms. Reeves hopes to maintain the U.K.'s high regulatory standards while rebalancing elements of the regulatory system to drive economic growth and competitiveness.
Read more. -
Mansion House: UK Government Announces Further Reforms To The Wholesale Markets Framework
November 14, 2024
HM Treasury has published a policy paper announcing further reforms to the U.K.'s wholesale markets framework, a key part of the latest Mansion House reforms HM Treasury has committed to legislate to amend the Markets in Financial Instruments legislative package to achieve these changes. Where the changes involve revoking existing legislation and placing it in the Financial Conduct Authority's Handbook, the revocation will coincide with the regulator's rules taking effect.
Firstly, the FCA will be given enhanced powers of direction regarding the reporting of OTC positions. This is intended to address issues that arose in the Nickel market in 2022 by empowering the FCA to ensure that exchanges receive the right transparency about OTC positions and enable exchanges to operate their position management obligations effectively. The FCA will be able to intervene where it considers there is a risk to market stability.
Second, legislation will be introduced revoking the transaction reporting provisions in MiFIR and delegating to the FCA the responsibility for establishing rules for the regime. It is envisaged that the FCA will be in a better position to consider long-term solutions to the challenges facing firms in complying with the existing regime.
Finally, the detailed firm-facing requirements contained in the MiFID Org Regulation will be revoked and replaced in the FCA's Handbook. This will give the FCA more flexibility to adjust to changing conditions requiring the standards to be updated. -
Mansion House: Financial Services Growth and Competitiveness Strategy
November 14, 2024
HM Treasury has launched a call for evidence on a proposed Financial Services Growth & Competitiveness Strategy, a key part of the latest Mansion House reforms. Once developed, the Strategy will serve as the central guiding framework for the next ten years through which the government aims to deliver sustainable, inclusive growth for the financial services sector and secure the U.K.'s competitiveness as an international financial center. To meet its objectives, the proposed strategy sets out five core policy pillars central to sustainable growth: innovation and technology, regulatory environment, regional growth, skills and access to talent, and international partnerships and trade. The proposed strategy also identified five priority growth areas within the financial services sector: fintech, sustainable finance, capital markets (including retail investment), insurance and reinsurance markets, and asset management and wholesale services. Responses to the call for evidence may be submitted is December 12, 2024. HM Treasury intends to publish the strategy in Spring 2025.
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UK Financial Services and Markets Act 2023 (Consequential Amendments) Regulations 2024 published
November 7, 2024
The Financial Services and Markets Act 2023 (Consequential Amendments) Regulations 2024 have been published, with an accompanying explanatory memorandum. Regulations 3 to 7 make consequential amendments in connection with the Financial Services and Markets Act 2023 (Commencement No. 8) Regulations 2024, which bring into force several paragraphs of Schedule 2 to FSMA 2023, granting the Financial Conduct Authority the power to make rules in relation to pre- and post-trade transparency obligations and systematic internalisers.
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UK Financial Conduct Authority Consults on Investment Research Payment Optionality for Fund Managers
November 5, 2024
The Financial Conduct Authority has opened a consultation on extending the new payment optionality for investment research to pooled funds. This proposal will allow asset managers to use the new payment optionality that was confirmed for MiFID firms earlier this year, in line with the recommendation made by the U.K. Investment Research Review. We discussed the new rules for MiFID firms in "UK allows bundled payments for third-party research and trading commissions."
The proposals apply to UCITS and AIF managers and residual collective investment scheme operators. Managers who take up the option will need to meet various requirements, including: (i) having a written policy on the approach of joint payments; (ii) establishing a research budget based on the expected amount of third-party research; (iii) having a cost allocation structure among research providers; (iv) assessing the price and value of research periodically; (v) allocating cost of research fairly; (vi) responsibility for operating and administering any research payment accounts; and (vii) investor disclosure.
The deadline for comments is December 16, 2024. If the FCA decides to proceed, it aims to publish any rules or guidance in the first half of 2025. -
UK Financial Conduct Authority Policy Statement and Discussion Paper for Improving Transparency for Bond and Derivatives markets
November 5, 2024
Following its consultation earlier this year, the Financial Conduct Authority has published a policy statement setting out its final position on the new U.K. bond and derivative transparency regime. In response to feedback, the FCA has made multiple changes to its proposals, including:- Modifying the post-trade deferral durations for bonds;
- Refining the grouping criteria for bonds; and
- Removing systems relying on negotiation from the scope of pre-trade transparency entirely.
Read more.Topic : MiFID II -
European Securities and Markets Authority Consults on Amendments to MiFID Research Regime
October 28, 2024
The European Securities and Markets Authority has published a consultation on amendments to the research provisions in MiFID II following changes introduced by the Listing Act. The Listing Act introduces changes that enable joint payments for execution services and research for all issuers, irrespective of the market capitalisation of the issuers covered by the research.
The consultation paper includes proposals to amend Article 13 of MiFID II to align it with the new payment option offered. The proposals aim to ensure that the annual assessment of research quality is based on robust criteria and that the remuneration methodology for joint payments for execution services and research does not prevent firms from complying with best execution requirements.
The deadline for comments is 28 January 2025. ESMA aims to provide its technical advice to the Commission in Q2 2025.Topic : MiFID II -
Financial Services and Markets Act 2023 (Commencement No 8) Regulations 2024 Published
October 28, 2024
The U.K. Financial Services and Markets Act 2023 (Commencement No. 8) Regulations 2024 have been made. The Regulations revoke certain pieces of EU law retained in the U.K. post-Brexit as well as bringing into force amendments made by the Financial Services and Markets Act 2023 to other such assimilated law. The regulations also bring into force amendments to FSMA 2000 made by FSMA 2023 giving HM Treasury the power to make regulations about unauthorized co-ownership alternative investment funds.
Revocations include: (i) removing LIBOR as a critical benchmark for the purpose of the U.K. Benchmark Regulations effective October 29, 2024; and (ii) revoking assimilated law versions of Commission Implementing Regulations (EU) 2018/33 and 2018/34 on October 29, 2024, which contain Implementing Technical Standards on the standardized presentation format of the statement of fees and the fee information document and their common symbol. These ITS supplement parts of the Payment Accounts Regulations 2015 that were revoked on January 1, 2024.
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European Securities and Markets Authority Updates Guidance Under MiFIR Review
October 16, 2024
The European Securities and Markets Authority has published an updated version of its manual on post-trade transparency and an updated version of its opinion on the assessment of pre-trade transparency waivers for equity and non-equity instruments under the Markets in Financial Instruments package. ESMA is providing further practical guidance on the provisions following the statement from last March on the transition for the application of the MiFID II/MiFIR Review, to reflect the changes introduced. ESMA explains that the amendments are published with the objective of contributing to the smooth transition and consistent application of MiFIR, and complements the clarifications on the applicable MiFIR Review and Technical Standards provisions provided in the Interactive Single Rulebook earlier this year. ESMA also stated that it has updated its Q&As on transparency and market structure issues.Topic : MiFID II -
EU Announces Next Steps for the Transition to T+1 Settlement
October 16, 2024
The European Commission, the European Central Bank and the European Securities and Markets Authority have published a joint statement on the next steps to support the preparations towards a transition to T+1. Under the EU Central Securities Depositories Regulation, ESMA is required to assess the appropriateness of shortening the settlement cycle in the EU and to propose a detailed roadmap towards a shorter settlement. ESMA plans to deliver its report to the Council of the European Union and the European Parliament in the coming months.
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EU Review of RTS on Transaction Reporting and Order Book Data Under MiFIR Review
October 3, 2024
The European Securities and Markets Authority has published a consultation on the review of regulatory technical standards on transaction data reporting and on order book data under the revised Markets in Financial Instruments Regulation. The proposed changes to the RTS stem from the MiFIR Review amendments. We discuss the overall MiFIR Review changes in our bulletin "MiFID II: the EU's latest adaptations". The deadline for comments is January 3, 2025. ESMA aims to publish a final report and submit the draft technical standards to the EC by the end of Q2 2025.
Read more.Topic : MiFID II -
EU Markets Authority Announces Next Steps for the Selection of Consolidated Tape Providers
September 30, 2024
The European Securities and Markets Authority has announced the next steps for the selection of Consolidated Tape Providers for bonds, shares and ETFs. ESMA will launch the selection procedure for the CTP for bonds on Friday January 3, 2025, intending to adopt a reasoned decision on the selected applicant within six months of the launch, i.e. by early July 2025. In June 2025, ESMA will launch the selection procedure for the CTP for shares and ETFs with the objective to adopt a reasoned decision on the selected applicant by the end of 2025.
ESMA explains that each selection procedure will be launched with the publication of a contract notice and procurement documents on the EU Funding & Tenders Portal. Prospective applicants are invited to register and familiarize themselves with the Portal. In the coming weeks, ESMA intends to share additional guidance on the assessment of exclusion criteria. ESMA will be available to answer questions throughout the application periods, ESMA also confirms that applicants will be granted as much time as possible, within the boundaries of EU procurement rules, to provide details on their projects. ESMA states that it will publish in December the feedback statement to its proposed technical standards on CTPs and the assessment criteria for the CTP selection procedure. We discussed ESMA's draft technical standards in "European Securities and Markets Authority Proposes Draft Technical Standards for Consolidated Tape Providers".Topic : MiFID II -
UK Regulator Finalizes Payment Optionality Rules
July 26, 2024
The Financial Conduct Authority has published a policy statement and final rules that introduce payment optionality for research and trading commissions. The unbundling of research costs from execution commissions has been a controversial topic since the requirements were introduced in 2018 by the second Markets in Financial Instruments Directive. It is widely accepted that these measures have led to a substantial decline in research coverage, in particular for small and medium sized companies. Both the U.K. and the EU had tried a quick fix for the issue by introducing an exemption for SME research, however, that did not improve the research market. The unbundling of research and trading commissions also caused major challenges for U.S. broker-dealers who have had to either register under the Advisers Act or take complex operational steps in order to continue providing research to European investment companies. Following the Investment Research Review, the FCA consulted earlier this year on its proposals for introducing payment optionality and, taking account of feedback, has adjusted the details of some of the guardrails that will apply where firms opt to apply joint payments.
Read more.Topic : MiFID II -
UK Conduct Authority Consults on Changes to the Derivatives Trading Obligation
July 26, 224
The Financial Conduct Authority has launched a consultation on three proposed amendments to different aspects of the U.K. derivatives trading obligation. The consultation is part of the Wholesale Markets Review. The Markets in Financial Instruments Regulation imposes a "trading obligation," requiring mandatory on-venue trading for financial counterparties and non-financial counterparties where they engage in transactions in derivatives that: (i) have been declared subject to the clearing obligation under the U.K.'s European Market Infrastructure Regulation; (ii) are admitted to trading or traded on at least one U.K. trading venue (a regulated market, multilateral trading facility or organised trading facility) or a third-country equivalent trading venue; and (iii) are sufficiently liquid. Responses to the FCA's consultation may be submitted until September 30, 2024. The FCA intends to publish its direction on the modification of the DTO in Q4.
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EU Statement on Transition of OTC-Transactions to New Post-Trade Transparency Regime
July 22, 2024
The European Securities and Markets Authority has published a public statement on the transition to the new regime for post-trade transparency of OTC-transactions in light of the revised Markets in Financial Instruments Regulation. According to Article 21a of MiFIR II, Designated Publishing Entities, when they are party to a transaction, are responsible for making the transaction public through an approved publication arrangement. MiFIR II requires ESMA to establish by September 29, 2024, a public register of all Designated Publishing Entities, specifying their identity and the classes of financial instruments for which they act as Designated Publishing Entities. MiFIR II does not provide for a transitional provision for the application of the Designated Publishing Entities regime for post-trade transparency.
Considering the need to ensure an orderly transition to the Designated Publishing Entities regime, ESMA and national competent authorities have agreed on a two-step approach: (i) ESMA starts publishing the Designated Publishing Entities register on September 29, 2024; and (ii) the new Designated Publishing Entities regime for post-trade transparency becomes fully operational on February 3, 2025. Therefore, ESMA expects that as of February 3, 2025, registered Designated Publishing Entities, which are party to a transaction, will make the transaction public through an APA. At the same time, ESMA expects that the current approach relying on systematic internalisers to make transactions public through an APA should stop applying as of this date.
Read more.Topic : MiFID II -
EU Consultation on Firms' Order Execution Policies Under MiFID Review
July 16, 2024
The European Securities and Markets Authority has opened a consultation on proposed draft regulatory technical standards specifying the criteria for establishing and assessing the effectiveness of investment firms' order execution policies, accounting for whether the orders are executed on behalf of retail or professional clients. These proposals arise out of the MiFID Review, and the resulting changes to the Markets in Financial Instruments Regulation and Directive, which were published in March. We discuss these in our bulletin, "MiFID II: the EU's latest adaptations." The MiFID II best execution requirements oblige investment firms to obtain the best possible result for their clients when executing client orders, and require execution venues and investment firms to make data relating to the quality of execution of transactions publicly available.
Read more.Topic : MiFID II -
Financial Markets Standards Board Consults on Transparency Draft Standard for Sharing of Standard Settlement Instructions
July 12, 2024
The Financial Markets Standards Board has commenced consulting on a transparency draft of a standard for sharing of standards settlement instructions. The standards settlement instructions specify the "where" of delivery/settlement after the execution of any financial transaction. The most significant cause of fails at the settlement stage, after lack of inventory, is incorrect or missing standards settlement instructions. The FSMB is proposing the standard to mitigate increased inefficiency risks as jurisdictions move to T+1 settlement. The standard aims to increase the adoption of electronic solutions that allow for standardization and pre-authentication of settlement instructions, and which facilitate "straight-through-processing" to improve efficiency of standards settlement instructions management by recipient counterparties and reduce settlement fails through incorrect standards settlement instructions. Where such electronic solutions are not legally or operationally feasible, the standard incorporates templates for manual sharing of standards settlement instructions which incorporate an industry-standard taxonomy (based on ISO 20022), which should minimize ambiguity. The proposal is structured in two main parts: (i) the standard, which sets out core principles for the channels, processes, and governance around sharing of standards settlement instructions; and (ii) standardized templates, based on industry-standard taxonomy, for use in residual cases where standards settlement instructions are sent manually. The deadline for comments is October 18, 2024.Topic : MiFID II -
European Securities and Markets Authority Consults on MiFID II Review Changes
July 10, 2024
The European Securities and Markets Authority has published a consultation paper on equity transparency, the volume cap, circuit breakers, Systematic Internalisers, the equity consolidated tape provider, and flags for non-equity transparency. The consultation aims to increase transparency and system resilience in financial markets, reducing reporting burden and promoting convergence in the supervisory approach. This package includes:- amendments to rules on the liquidity assessment for equity instruments, on equity transparency and on the volume cap;
- a draft of the new ITS on Systematic Internalisers;
- a section on the equity CTP in relation to the input/output data, to ensure full alignment between the transparency requirements and the CTP specifications;
- a section on flags to be used in the post-trade transparency reports for non-equity instruments which was missing in the previous consultation; and
- new rules specifying organizational requirements of trading venues, adding new provisions on circuit breakers and with targeted amendments to adapt to the Digital Operational Resilience Act framework.
Topic : MiFID II -
Council of the European Union Agrees Negotiating Mandate on Retail Investment Package
June 12, 2024
The Council of the European Union has announced that it has agreed its negotiating position on the retail investment package and published the relevant texts. The package consists of an amending Directive, known as the Omnibus Directive, which revises existing rules set out in the Markets in Financial Instruments II package, the Insurance Distribution Directive, the Undertakings for the Collective Investment in Transferable Securities Directive, the Alternative Investment Fund Managers Directive, and Solvency II, as well as an amending Regulation, which revises the Packaged Retail and Insurance-based Investment Products Regulation.
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European Commission Consults on Draft Delegated Regulation for OTC Derivatives Identifying Reference Data
June 12, 2024
The European Commission has published consultation for a draft Delegated Regulation supplementing the Markets in Financial Instruments Regulation as regards OTC derivatives identifying reference data to be used for the purposes of the transparency requirements laid down in Article 8a(2) and Articles 10 and 21 of MiFIR. Following the MiFIR Review, MiFIR now clarifies that the pre- and post-transparency requirements for non-equity instruments applies to both exchange-traded and OTC derivatives. The post-trade disclosure obligation for investment firms was also amended and that obligation no longer applies to derivatives "traded on a trading venue," but it does apply to OTC derivatives traded by an investment firm either on its own account or on behalf of clients. The transaction reporting obligation applies to both types of derivatives.
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EU Discussion Paper on Investment Firms' Prudential Framework
June 3, 2024
The European Banking Authority and European Securities and Markets Authority have published a joint discussion paper on the potential review of the investment firms' prudential framework. The discussion paper aims at gathering early stakeholder feedback to inform the response to the European Commission's call for advice.
The EBA notes that it is of the overall opinion that the current framework reaches the original general objectives, providing a robust and risk-sensitive prudential framework tailored to the size, activities and complexity of investment firms regulated under the Markets in Financial Instruments package. Nonetheless, it notes that market participants and supervisors highlighted a number of issues or areas of potential improvements of the prudential framework that may lead to changes to either the Investment Firm Regulation and Investment Firm Directive or to the related delegated regulations.
Among other things, the discussion paper considers: (i) the implications of the adoption of the new EU Banking package (known as CRD VI and CRR III) concerning the trading book, the fundamental review of the trading book and credit valuation adjustments; (ii) prudential consolidation and a possible extension to crowdfunding and crypto-asset service providers; (iii) aspects related to compensation, including the scope of application, compensation policies, the requirements on variable remuneration, and their oversight, disclosure, and transparency; (iv) the treatment of firms currently non-prudentially regulated and active in commodity markets; (v) the categorization of investment firms; and (vi) reviewing the existing K‐factors to cover risks currently only addressed under the Pillar 2 framework or as possible alternatives to existing K-factors.
The deadline for comments is September 3, 2024. The EBA and ESMA plan to publish a final report by December 2024. -
EU Statement on the Use of AI in the Provision of Retail Investment Services
May 30, 2024
The European Securities and Markets Authority has published a public statement on the use of AI in the provision of retail investment services. When using AI, ESMA expects firms to comply with relevant Markets in Financial Instruments package requirements, particularly when it comes to organizational aspects, conduct of business, and their regulatory obligation to act in the best interest of the client.
ESMA reminds firms that although AI technologies offer potential benefits to firms and clients, they also pose inherent risks, such as: (i) algorithmic biases and data quality issues; (ii) opaque decision-making by a firm's staff members; (iii) overreliance on AI by both firms and clients for decision-making; and (iv) privacy and security concerns linked to the collection, storage, and processing of the large amount of data needed by AI systems.
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UK Delays Legislation for Amending Ancillary Activities Test
May 29, 2024
The Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) (Amendment) Order 2024 was published on May 29, 2024 and enters into force on December 31, 2024. The 2024 Amendment Order amends the Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023 (S.I. 2023/548) by omitting the provisions relating to the new ancillary activities regime.
The 2023 Order, which enters into force on January 1, 2025, among other things, paved the way for the Financial Conduct Authority to develop a simpler test for determining which firms need to be authorized as investment firms as a result of their commodities and emission allowances trading business, known as the "ancillary activities test". The ancillary activities test is an exemption from investment firm authorization requirements for firms that trade commodity derivatives or emission allowances as an ancillary activity to their main business, such as energy and other commodity trading firms which are active in both physical trading and financial instrument trading. Under the MiFID II regime, the ancillary activities exemption became based upon a hard-edged test with various financial thresholds. Some of these tests resulted in counterintuitive outcomes for firms, while other issues with the way in which the legislation had been drafted needed resolving via unusually narrow or arguably unnatural interpretations of the text, sometimes supported by regulatory or industry guidance. The 2023 Order simplified the process for determining when a firm satisfies the "ancillary activities" test in the post-Brexit U.K.
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European Securities and Markets Authority Proposes Draft Technical Standards for Consolidated Tape Providers
May 23, 2024
The European Securities and Markets Authority has opened a consultation on draft technical standards related to consolidated tape providers and data reporting service providers, and the assessment criteria for the CTP selection procedure. The Markets in Financial Instruments Regulation envisaged the establishment of a "consolidated tape" for all equity and non-equity transactions. The CTP would collect post-trade information published by trading venues and Approved Publication Arrangements, and consolidate this into a continuous live data stream made available to the public. No consolidated tape has yet been set up in either the EU or the U.K. Following the March publication in the Official Journal of the European Union of the EU's MiFID Review legislation, the provisions in MiFIR on CTPs and DRSPs have been revised to, among other things, require trading venues and APAs (collectively referred to now as "data contributors") to submit market data directly and exclusively to the entities appointed by ESMA as the CTP for each asset class.
Read more.Topic : MiFID II -
EU Consultation on Amendments to Commodity Derivatives Technical Standards
May 23, 2024
The European Securities and Markets Authority has published a consultation paper on proposed changes to the rules for position management controls and position reporting. These proposals arise out of the MiFID Review, and the resulting changes to the Markets in Financial Instruments Regulation and Directive, which were published in March. MiFID II requires national regulators to establish and apply position limits on the size of a net position in commodity derivatives traded on trading venues and economically equivalent OTC contracts. The limits apply to the size of a position that a person can hold, including any other positions held on behalf of that person by group entities. Trading venues are required to apply position management controls, including monitoring of open interest and obtaining information about the size and purpose of a position entered into, beneficial or underlying owners, concert arrangements, and any related assets or liabilities. Trading venues also have powers to require termination or reduction of positions and to require a person to provide liquidity back into the market at an agreed price and volume to mitigate the effect of a large or dominant position. The position reporting regime is intended to support the application and enforcement of position limits.
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European Securities and Markets Authority Launches Consultation on Technical Standards Arising out of MiFIR Review
May 21, 2024
The European Securities and Markets Authority has launched its first consultation on regulatory technical standards arising from the MiFID Review and the resulting changes to the Markets in Financial Instruments Regulation and Directive, which were published in March. The MiFID Review amendments aim to enhance the availability of information on trading and companies for investors. ESMA's consultation covers:- Amendments to RTS 2 - the amendments relate to pre- and post-trade transparency requirements for non-equity instruments (bonds, emission allowances and structured products), and aim at ensuring trade information is available to stakeholders by improving, simplifying, and harmonising transparency requirements, and combining the right balance between real-time transparency and the ability to defer publication.
- Amendments to RTS 23 - the amendments relate to the obligation to provide instrument reference data that is fit for both transaction reporting and transparency purposes. ESMA also proposes to align this data with other relevant reporting frameworks and international standards in relation to reference data.
- New draft RTS on the obligation to make pre-and post-trade data available on a "reasonable commercial basis"—this is intended to guarantee that market data is available to data users in an accessible, fair, and non-discriminatory manner. The consultation elaborates on the cost-based nature of fees and the applicable reasonable margin.
Responses to the consultation may be submitted until August 28, 2024. ESMA intends to submit the draft RTS to the European Commission by the end of Q4 2024.Topic : MiFID II -
UK Updates and Expands Equivalence for US Derivatives Trading Venues
May 14, 2024
The Markets in Financial Instruments (Equivalence) (United States of America) (Commodity Futures Trading Commission) Regulations 2024 (SI 2024/638) were made on May 14, 2024 and entered into force on June 4, 2024. In preparation for Brexit, the U.K. onshored the EU's 2017 equivalence decision for the legal and supervisory framework applicable to designated contract markets and swap execution facilities in the U.S. for the purposes of the trading obligation for derivatives under the Markets in Financial Instruments Regulation. MiFIR requires that derivatives declared subject to the derivatives trading obligation must be traded on U.K. trading venues or third-country trading venues following an equivalence decision by HM Treasury. The onshored 2017 equivalence decision covers designated contract markets and swap execution facilities supervised and authorized by the Commodity Futures Trading Commission, and ensured that, when the U.K. left the EU, U.K. counterparties could continue to satisfy the DTO when they trade derivatives instruments on covered DCMs and SEFs.
HM Treasury has committed to reviewing the U.K.'s equivalence decision under the Smarter Regulatory Framework. In addition, HM Treasury considers that the CFTC's regime remains equivalent to U.K. MiFIR. The new Regulations therefore revoke and replace the onshored 2017 equivalence decision, updating the list of trading venues to include all current CFTC-authorized DCMs and SEFs. -
UK Conduct Regulator Proposes Payment Optionality for Investment Research
04/11/2024
The U.K. Financial Conduct Authority has opened a consultation setting out proposals for allowing firms to use joint (bundled) payments for third-party research and execution services, subject to certain requirements being met. The proposals follow the recommendations made by the U.K. Investment Research Review in July last year, and which both the U.K. government and FCA accepted. This also follows the removal by the U.S. Securities and Exchange Commission of its temporary exemption on the need for U.S. firms to register as investment advisors if they sell research separately from execution. Responses to the consultation may be submitted until June 5, 2024. Depending on the scope of feedback received, the FCA is aiming to publish its final rules or guidance by the end of June 2024.
The FCA is proposing to introduce a new option that facilitates bundled payments for third-party research and execution services. The new option would be available alongside the existing methods of a firm making direct payments out of its own resources or from a separate research payment account.
Firms that opt to make bundled payments will need to satisfy certain conditions.
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EU MiFID II Review Package Published
04/04/2024
On March 8, 2024, legislation amending the EU's Markets in Financial Instruments Directive and Regulation were published in the Official Journal of the European Union. The amending Directive and amending Regulation aim to enhance the availability of information on trading and companies for investors. Some of the proposed changes are similar to those that the U.K. has made or is contemplating making as part of the Wholesale Markets Review.
Read more.Topic : MiFID II -
UK Data Reporting Services Regulations 2024 Published
02/19/2024
On January 29, 2024, the Data Reporting Services Regulations 2024 (SI 2024/107) were made. The Data Reporting Services Regulations 2024 will enter into force on the same day that the Data Reporting Services Regulations 2017 are revoked, which is April 5, 2024, according to the Financial Services and Markets Act 2023 (Commencement No. 4 and Transitional and Saving Provisions) (Amendment) Regulations 2023. The Data Reporting Services Regulations 2024 will replace the Data Reporting Services Regulations 2017, restating with modifications some of the 2017 content.
The Financial Services and Markets Act 2023 granted the FCA power to make rules for data reporting service providers (DRSPs), of which there are three types- Approved Publication Arrangements, Approved Reporting Mechanisms and Consolidated Tape Providers. DRSPs generally facilitate compliance by investment firms of their regulatory reporting obligations, ensuring that market data is accessible and supporting effective price formation and best execution.
The Data Reporting Services Regulations 2024 set the regulatory perimeter of the U.K.'s regime for DRSPs, set out the authorization regime for providing a data reporting service, and restate the FCA's supervisory and enforcement powers. The FCA is also given powers to run a tender process to select U.K. CTPs for a particular asset class. No CTP is yet established in the U.K. or the EU. The FCA published its final framework for a consolidated tape for bonds in December 2023, and the tender process for the bond CTP will progress through 2024. -
Fourth Commencement Regulations Under Financial Services and Markets Act 2023 Published
01/18/2024
The Fourth Commencement Regulations - the Financial Services and Markets Act 2023 (Commencement No. 4 and Transitional and Saving Provisions) (Amendment) Regulations 2023 - under the Financial Services and Markets Act 2023 were made on December 14, 2023.
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UK Conduct Regulator Consults on Bond and Derivatives Markets Transparency Requirements
01/08/2024
The U.K. Financial Conduct Authority has opened a consultation on proposals for improving transparency for bond and derivatives markets. Following the Wholesale Markets Review, the Financial Services and Markets Act 2023 grants powers to the FCA to make rules which will replace the current pre-trade and post-trade disclosure rules for bonds, structured finance products, emission allowances and derivatives set out in the U.K. Markets in Financial Instruments Regulation. The FCA's rules must ensure efficient price formation and the fair evaluation of financial assets. This consultation sets out the FCA's proposed approach to those rules. Responses to the FCA's consultation may be submitted until March 6, 2024.
The FCA is proposing that trading venues and investment firms dealing OTC will be subject to minimum harmonized transparency requirements for sovereign bonds, corporate bonds and certain derivatives subject to the clearing obligation. For these financial instruments, there will be large in scale thresholds. Pre-transparency waivers will be available for orders above the threshold and deferrals for post-trade requirements. For other financial instruments, the FCA is proposing to set the standards and criteria to which trading venues should refer in order to meet the FCA's transparency expectations. Investment firms dealing in other financial instruments will not be required to report their transactions to the public.
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UK Finalizes Framework for Consolidated Tape for Bonds
01/08/2024
Following its consultation last year, the U.K. Financial Conduct Authority has published its final framework for a consolidated tape for bonds. MiFID II introduced requirements for a CT for transactions in equity and non-equity instruments. It requires a consolidated tape provider to collect post-trade information published by trading venues and approved publication arrangements and to consolidate this into a continuous live data stream made available to the public. No consolidated tape has yet been set up in either the U.K. or the EU. The Financial Services and Markets Act 2023 gave the FCA rule-making powers for Data Reporting Service Providers, enabling it to set a framework for the development of a CT.
The FCA's policy statement sets out its rules and guidance on the bond CT, which are due to come into force on April 5, 2024, which is the anticipated date that the draft Data Reporting Services Regulations 2023 are expected to enter into force, subject to Parliamentary process. The DRSRs 2023 will replace the Data Reporting Services Regulations 2017, restating with modifications some of the 2017 content. The tender process for the bond CTP will kick-off in 2024.
The FCA's final policy is set out in a paper that also gives the FCA's response to feedback on a CT for equities and sets out proposals on payments to data providers by the bond CTP and forms for a Data Reporting Service Provider, adapted to reflect the DRSRs 2023 and the FCA's Handbook amendments. Responses to the FCA's proposals may be submitted until February 9, 2024. The FCA is aiming to finalize those rules and forms for April 5, 2024 too.Topic : MiFID II -
UK Statutory Instrument Made to Ensure Legislation Remains Consistent with Latest Repeals
01/08/2024
The Financial Services and Markets Act 2023 (Consequential Amendments) Regulations 2023 make consequential amendments to various pieces of legislation arising from the repeal by the Financial Services and Markets Act 2023 of certain retained EU financial services laws. The Regulations took effect on January 1, 2024. The Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023 provided for the repeal of 98 statutory instruments on August 29, 2023, and further revocations from January 1, 2024, including the European Long-Term Investment Funds Regulation (and related SI and tertiary legislation) and a provision from the Capital Requirements Regulation so as to allow the Bank of England more flexibility to set internal Minimum Requirements for Own Funds and Eligible Liabilities for U.K. subsidiaries of non-U.K. global systemically important banks. These latest Regulations make consequential amendments to ensure that legislation remains consistent with the January 2024 repeals.
Consequential amendments are also made to account for the removal of the double volume cap from the U.K.'s Markets in Financial Instruments regime. The DVC limited the level of dark trading to a certain proportion of total trading in an equity. Instead, the Financial Conduct Authority must monitor trading and has new powers to direct that transparency waivers should be suspended if the ongoing use of the waiver would impact market integrity. In addition, consequential amendments are made following the Electronic Money, Payment Card Interchange Fee and Payment Services (Amendment) Regulations 2023 which amended payments-related REUL. -
UK Regulator Consults on Proposed Reforms to the Commodity Derivatives Regulatory Framework
12/08/2023
The U.K. Financial Conduct Authority has launched a consultation on proposals for reforming the commodity derivatives regulatory framework, which covers position limits, the exemptions from those limits, position management controls, the reporting regime and the ancillary activities test. Responses to the consultation may be submitted until February 16, 2024.
The Financial Services and Markets Act 2023 has already made several reforms to the U.K.'s commodity derivatives regulatory regime. The MiFID II requirement for commodities position limits to be applied to all exchange-traded contracts and over-the-counter, or non-venue traded ("OTC"), contracts that are economically equivalent to exchange-traded commodity derivatives was revoked. Instead, the FCA will decide the scope of the commodity derivates to which position limits will apply. In addition, the powers for setting position controls were transferred from the FCA to the operators of trading venues. This contrasts with the EU approach, where position limits are not just set by the regulators, but actually in formulae in legislation, which have proven ill-thought-through and problematic for numerous markets. The FCA has retained the power to set position limits if certain conditions are satisfied, and has new rulemaking powers to establish how trading venues should set and apply position limits and what position management controls they should operate. Generally, the reversion of position limit controls to exchanges as self-regulatory organisations reflects the U.K.'s status quo ante, i.e., prior to MiFID II.
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HM Treasury Publishes Response to Cryptoasset Regulatory Regime Consultation
11/03/2023
HM Treasury has published a response to its consultation on cryptoasset regulation, setting out its final proposals for the U.K.'s cryptoasset regulatory regime. The U.K. plans to make cryptoassets a new category of "specified investment" under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and regulate certain activities conducted in relation to them. Under the new regime:- Firms conducting relevant activities and offering their services in or to the U.K. by way of business would need to apply for authorization by the U.K. Financial Conduct Authority. The relevant activities are: issuing or admitting cryptoassets to trading; operating cryptoasset trading venues; dealing as principal or arranging deals in cryptoassets; operating a cryptoasset lending platform; and safeguarding or safeguarding and administering cryptoassets (or arranging the same). Overseas firms offering their services into the U.K. may need to obtain FCA permission (although HM Treasury envisages equivalence/deference-type arrangements in the future and is considering alternative approaches to full authorization in the interim).
- Firms that are already authorized to conduct other activities will need to apply for a Variation of Permission if they wish to conduct regulated cryptoasset activities.
- Authorization under the new regime will not be automatically granted to cryptoasset firms registered with the U.K. Financial Conduct Authority for money laundering purposes, although the FCA will consider applicants' regulatory history when determining authorization applications.
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UK Regulatory Guidance on Trading Venue Regulatory Perimeter
08/04/2023
The U.K. Financial Conduct Authority has issued final guidance to clarify the scope of the regulatory perimeter for trading venues and the regulatory approvals needed to conduct their business. The guidance caters for new platforms emerging from technological developments. The guidance is one of the outcomes of HM Treasury's Wholesale Markets Review (which we discuss in our client note, "UK Wholesale Markets Review"). Other aspects of the Review are being implemented through the Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") or by amendments to FCA rules.
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UK Regulator Proposes Framework for a Consolidated Tape
08/03/2023
On July 5, 2023, the U.K. Financial Conduct Authority launched a consultation on a proposed U.K. consolidated tape for bonds. MiFID II introduced requirements for a "consolidated tape" for transactions in equity and non-equity instruments. It requires a consolidated tape provider to collect post-trade information published by trading venues and approved publication arrangements and to consolidate this into a continuous live data stream made available to the public. No consolidated tape has yet been set up in either the U.K. or the EU. The EU announced at the end of June 2023 that political agreement had been reached on the proposals to introduce an EU consolidated tape.
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UK Investment Research Review Signifies Further EU-UK Divergence on Unbundling Research Rules
08/02/2023
The report and recommendations of the UK Investment Research Review were published on July 10, 2023. The recommendations have been accepted by the government and the Financial Conduct Authority has committed to prioritizing consulting on proposed rule changes with a view to revised rules applying in H1 2024.
Read moreTopic : MiFID II -
UK Financial Services and Markets Act 2023
08/02/2023
Following rigorous debate in Parliament, the U.K.'s latest Financial Services and Markets Act (FSM Act) received royal assent on June 29, 2023. The FSM Act significantly changes the U.K.'s regulatory framework for financial services, implementing the government's post-Brexit Future Regulatory Framework Review and the Edinburgh Reforms. The existing regulatory model under the Financial Services and Markets Act 2000 has been enhanced with the introduction of a new "Designated Activities Regime" for the regulation of activities related to the financial markets, transfer to the U.K. regulators of responsibility for making and reviewing detailed firm rules, subject to enhanced oversight by Parliament and HM Treasury, and the establishment of a regulatory framework for oversight of third parties that provide critical services to financial institutions.
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European Commission Publishes Retail Investment Strategy
06/05/2023
On May 24, 2023, the European Commission published a Retail Investment Strategy package aimed at enhancing retail investor protections across the EU and encouraging participation in the EU capital markets. The package comprises an amending Directive, which makes changes across a range of EU legislation, and an amending Regulation, which revises the EU's Packaged Retail and Insurance-based Investment Products Regulation.
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UK Ancillary Activities Test On Track For Simplification From 2025
05/18/2023
The Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023 was made on May 17, 2023. The Order, which enters into force on January 1, 2025, paves the way for the Financial Conduct Authority to develop a simpler test for determining which firms need to be authorized as investment firms as a result of their commodities and emission allowances trading business, known as the "ancillary activities test". The final Order is substantively the same as the draft SI, which we discuss in our related blog: "UK Government Publishes Draft Legislation Revising Application of The Ancillary Activities Test for Commodity Derivatives and Emission Allowances".
Read more.Topic : MiFID II -
UK Financial Conduct Authority Finalizes Improvements to Equity Secondary Markets
05/09/2023
On May 3, 2023, the U.K. Financial Conduct Authority published a Policy Statement on Improving Equity Secondary Markets, following its consultation last year. These changes are part of the response to the Wholesale Markets Review led by HM Treasury. Some of the changes from the WMR require legislative changes and are being progressed in the Financial Services and Markets Bill. We discuss these changes, and others proposed by the Bill in our client note, "UK Financial Services and Markets Bill". The changes that the FCA is bringing in do not require legislation or new powers for the FCA. The FCA confirms that it will consult this year and next on further reforms to the requirements for equity markets once the detailed firm-facing obligations are transferred to its Handbook.
Read more.Topic : MiFID II -
UK Investment Research Review Call for Evidence Published
04/05/2023
The U.K. Investment Research Review call for evidence was published on April 3, 2023. Relevant background to these issues is set out in our recent client note, “MiFID II: An Update on the Rules for Unbundling of Research,” in which we discussed the MiFID II requirements, the actions of the U.S. SEC, potential changes to the U.K. and EU MiFID II rules and the implications for broker-dealers that receive “hard dollars” for research. In summary, the research that investment managers typically receive from brokers is, under MiFID II, generally classified as a prohibited “inducement,” unless the investment manager pays for the research either: (a) directly from its own resources; (b) from a “Research Payment Account” (RPA) funded, with the client’s prior approval, with an advisory client’s money; or (c) a combination of the two methods. These requirements only apply directly to U.K.-regulated investment firms. However, brokers outside of the U.K. are affected by the legislation. Before the U.S. Securities and Exchange Commission granted exemptive relief, U.S. broker-dealers faced challenges because receiving MiFID II-compliant direct payments for research from U.K. investment managers would have amounted to accepting “hard dollar” payments, vitiating an important exclusion from being regulated as investment advisers.
Read more.Topic : MiFID II -
EU Opinion on Trading Venue Perimeter
04/03/2023
On February 2, 2023, the European Securities and Markets Authority published a final report and an Opinion on the trading venue perimeter. The Opinion clarifies the definition of multilateral systems under the EU's revised Markets in Financial Instruments Directive and sets out guidance on when systems should be considered as multilateral such that authorization as a trading venue would be required. In issuing the Opinion, ESMA is seeking to address the regulatory inconsistencies that have arisen because there is no EU-wide homogenous view as to what constitutes a multilateral system and to provide more certainty about when a system will be considered multilateral, and therefore should apply for authorization as a trading venue. The U.K.'s Financial Conduct Authority recently consulted on proposed guidance on the regulatory perimeter for multilateral trading facilities and on possible future changes to smaller trading venues' regulatory obligations. The FCA is expected to publish its final guidance in Q2 2023.
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UK Government Publishes Draft Legislation Revising Application of the Ancillary Activities Test for Commodity Derivatives and Emission Allowances
03/30/2023The U.K. government has published a draft statutory instrument (and related explanatory memorandum), which will be known as the Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023. The draft SI will simplify the process for determining when a firm satisfies the “ancillary activities” test and reduce the burden on firms that apply the test. The changes were discussed under the Wholesale Markets Review and announced as part of the Edinburgh Reforms.
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UK Government Publishes its Proposals for Cryptoasset Regulation
02/14/2023
The U.K. government has published its much-anticipated proposals for regulating the cryptoasset industry. These proposals, currently in the form of a consultation, will see many (but not all) cryptoasset-related activities being brought within the regulatory perimeter for financial services in the U.K. The consultation is extensive, covering the main elements of a new regime for cryptoasset issuance and disclosure, trading, custody and lending, as well as a proposed market abuse framework for cryptoassets.
The consultation closes on 30 April 2023. The government will publish its response once it has analysed the feedback, which will be followed by legislation being put before Parliament. The Financial Conduct Authority will consult on its proposed detailed rules once the legislation has been published.
The government has also announced a significant change to its earlier communicated approach to the regulation of cryptoasset financial promotions. Previously, such promotions could be issued only by regulated financial institutions. The changes will mean that those cryptoasset businesses that are registered with the FCA for the purposes of anti-money laundering compliance will be able to communicate their own financial promotions in relation to qualifying cryptoassets.
We discuss these proposals in detail in our client note, "UK Proposals for Cryptoasset Regulation". -
Edinburgh Reforms: Changes to the Laws of the UK Financial Services Sector
12/09/2022
The U.K. Government has announced on a series of initiatives, billed as the Edinburgh Reforms, to reform the laws for the U.K. financial services sector. The proposals cover:- Reforms to Ring-Fencing Regime;
- Implementation of Post-Brexit Financial Regulatory Framework;
- Growth and Competitiveness Remit for U.K. Regulators;
- Reforms to Wholesale Markets;
- Faster Settlement;
- Senior Manager's and Certification Regime;
- Changes to Promote Investment and Growth in Financial Services;
- Sustainable Finance;
- FinTech and Digital Assets; and
- Consumer Credit.
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UK Financial Conduct Authority Consults on Regulatory Perimeter Guidance for Trading Venues
09/22/2022
The U.K. Financial Conduct Authority has published a consultation paper on proposed guidance on the regulatory perimeter for multilateral trading facilities and on possible future changes to smaller trading venues' regulatory obligations. The FCA's consultation follows proposals made in HM Treasury's July 2021 U.K. Wholesale Markets Review, the response to which was published in March 2022. Responses to the FCA's consultation should be submitted by November 11, 2022. The FCA plans to finalize the draft guidance and publish a policy statement in Q2 2023.
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UK Government Publishes Financial Services and Markets Bill
07/20/2022
The U.K. government has published the much anticipated Financial Services and Markets Bill. Following its exit from the EU, the U.K. has undertaken a fundamental review of how financial regulation policy and rules should be made, reviewed and established in law, particularly in light of the return of the U.K.'s sovereignty. Furthermore, there has been a substantial assessment of the U.K.'s financial services rules and regulations, with some areas warranting further consideration. The Bill implements the outcomes of the Future Regulatory Framework Review, which assessed whether the U.K. financial services regulatory framework is fit for purpose and able to support future growth, particularly in light of challenges such as Brexit and climate change. On the same day, HM Treasury published its response to the final consultation in the FRF Review. The FSM Bill establishes a revised blueprint for financial services regulation by revamping the existing model under the Financial Services and Markets Act 2000 and revoking retained EU law in financial services. The regulators will be delegated powers for detailed rulemaking, and as a result, become subject to enhanced Parliamentary oversight.
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EU Consultation on Guidelines for Applications to Operate DLT Market Infrastructures under the EU Pilot Regime
07/11/2022
The European Securities and Markets Authority has launched a consultation on proposed guidelines on standard forms, formats and templates to apply for permission to operate distributed ledger technology for market infrastructure. The EU Regulation on a pilot regime for DLT market infrastructures will permit certain DLT market infrastructures to operate with exemptions from some elements of otherwise applicable EU financial services legislation, which may otherwise inhibit the trading and settlement of crypto-assets. The DLT Regulation sets the conditions for operating a DLT multilateral trading facility (DLT MTF), DLT settlement system (DLT SS) and DLT trading and settlement system (DLT TSS), and will, for the most part, apply from March 23, 2023. ESMA is consulting on proposed guidelines on:- the minimum instructions that national competent authorities should provide to market participants for submitting their applications; and
- the method that applicants should use to provide the requested information and documents to their competent authorities.
Responses to the consultation may be submitted until September 9, 2022. ESMA will consider the feedback and intends to publish the final guidelines before the DLT Regulation applies. -
EU Distributed Ledger Technology Pilot Regime Published
06/02/2022
The EU has published in the Official Journal of the European Union its Regulation on a pilot regime for market infrastructures based on distributed ledger technology. The pilot regime will permit certain DLT market infrastructures to operate with exemptions from some EU financial services legislation, which may otherwise inhibit the trading and settlement of crypto-assets. The regime is intended to promote legal certainty, support innovation, preserve market integrity and ensure financial stability for the use of DLT in crypto-asset and e-money token markets.
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Government Details Proposed Financial Services and Markets Bill
05/10/2022
Following the Queen's speech yesterday, the government has published a briefing pack setting out details of the bills that it intends to introduce, including the so-called Brexit Freedoms Bill as well as key legislation relevant to financial services. The government will introduce a Financial Services and Markets Bill, which will, among other things:- Introduce new statutory objectives for the financial services regulators to support growth and international competitiveness.
- Implement the changes to the wholesale markets arising out of the Wholesale Markets Review. HM Treasury confirmed in March of this year that the changes that will be made by legislation and where powers will be delegated to the financial services regulators for rules to be made. Among the changes are the removal of the share trading obligation and the double volume cap, changes to the derivatives trading obligation, taking OTC derivatives that are economically equivalent to exchange traded commodity derivatives out of the position limits regime, and the establishment of a consolidated tape.
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Queen’s Speech Confirms Government Will Proceed with Brexit Freedoms Bill
05/10/2022
Prince Charles, Prince of Wales, delivered the Queen’s speech in which he announced that the government will be introducing the so-called Brexit Freedoms Bill, which was first announced by Prime Minister Boris Johnson on January 31, 2022, and is intended to make it easier to amend or remove retained EU laws to better suit the U.K.’s circumstances and policies. The Brexit Freedoms Bill will work in tandem with a government drive to reform, repeal and replace EU laws that are seen as outdated, cumbersome or otherwise not in the U.K.’s national interest.
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UK Conduct Regulator Publishes Results of Review of Investment Platforms Market
05/04/2022
The U.K. Financial Conduct Regulator has published a statement on the results of its review of the investment platforms market. The FCA launched its Investment Platforms Market Study in 2017 to investigate whether competition between investment platforms was working in the interests of consumers. Investment platforms enable consumers and financial advisers to review investment opportunities across a range of funds and execute and change their investments. In 2019, the FCA published a Final Report which concluded that consumers should be able to switch more easily between investment platforms, and proposed a series of measures to help achieve this. It also announced that it would review the industry's progress in adopting these measures in 2020/2021. The FCA's statement sets out the results of that review.
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UK Conduct Regulator Commits to Three-year Strategy of Improving Outcomes of Regulation
04/07/2022
The U.K. Financial Conduct Authority has published a three-year Strategy on improving outcomes of regulation and its 2022/23 Business Plan. In the 2022-2025 Strategy, the FCA outlines its expectations of financial services across all sectors, with a view to the overall outcomes that firms should achieve. There are three outcomes for both the wholesale and retail markets, which are fair value, access and confidence. An additional outcome of suitability and treatment applies for the retail markets, to ensure that consumers are treated well and are sold products and services that are suitable for them. The 2022/23 Business Plan sets out the detailed work that the FCA will undertake over the next year to meet the commitments made in its Strategy.
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HM Treasury Confirms Policy Approach on Wholesale Markets Review
03/01/2022
HM Treasury has published its consultation response to the Wholesale Markets Review, setting out summaries of responses received to its proposals and how changes will be progressed. There are certain areas that HM Treasury will not progress at this stage, and which will be subject to further consideration.
For the proposals that are being taken forward, implementation may be by legislation or pursuant to the Financial Conduct Authority's rules. HM Treasury states that legislation will be brought forward when Parliamentary time allows. In certain instances, where details are currently set out in legislation, but would sit better in regulatory rules, the government intends to legislate to delegate responsibility to the FCA for preparing detailed rules, which it states will be part of the implementation of the Future Regulatory Framework review. The FCA is expected to consult on its proposals for existing rule amendments in the first half of this year.
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European Securities and Markets Authority Publishes Guidelines on MiFID II Appropriateness and Execution-Only Requirements
01/03/2022
The European Securities and Markets Authority has published new Guidelines on the appropriateness and execution-only requirements under the revised Markets in Financial Instruments Directive. The appropriateness requirements under MiFID II require investment firms providing investment advice to assess a potential client's knowledge and experience in the investment field, to ascertain whether a particular service or product is appropriate for the client. There are exemptions from these requirements under the execution-only framework, subject to certain conditions being met. ESMA's new Guidelines are designed to enhance convergence across the EU on the application of these requirements.
Read more.Topic : MiFID II -
UK Financial Conduct Authority Confirms Approach to Supervision of Commodity Derivatives Position Limits Regime
12/20/2021
The U.K. Financial Conduct Authority has published a statement confirming its approach to supervising commodity derivatives position limits. The statement follows the FCA's Supervisory Statement on the operation of the Markets in Financial Instruments regime after the end of the EU withdrawal period published in December 2020 in which the regulator stated that until January 1, 2022, it would not take any supervisory or enforcement action for positions that exceed limits where the position is held by a liquidity provider to fulfill its obligations on a trading venue. In its latest statement, the FCA confirms that it will extend that approach pending the outcome of HM Treasury's Wholesale Market Review and subject to any indications of market abuse arising. The FCA states that firms should make their own assessment of whether the positions they take are positions resulting from their actions as a liquidity provider. Firms do not need to report their assessments to the FCA; however, a firm may need to explain an assessment to the FCA on request.Topic : MiFID II -
European Commission Proposes Revisions to MIFID II
11/25/2021
The European Commission has published legislative proposals to amend the Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation. The proposals are part of the Commission's package of proposals to enhance the availability of information on trading and companies for investors. The main changes are set out in the proposed regulation to amend MiFIR. Some of the proposed changes are similar to those that the U.K. has made or is contemplating making as part of the Wholesale Markets Review.
Read more.Topic : MiFID II -
UK Financial Conduct Authority Publishes Discussion Paper on Sustainability Disclosure Requirements and Investment Labels
11/03/2021
The U.K. Financial Conduct Authority has published a discussion paper on its proposed Sustainability Disclosure Requirements and sustainable investment labels. The FCA is seeking initial views on these proposals with the intention of consulting on fuller policy proposals in Q2 2022. Responses to the discussion paper may be submitted until January 7, 2022. These proposals link to the U.K. government's ambitions on climate change and green finance, detailed in its October policy paper, Greening Finance: A Roadmap to Sustainable Investing, further details of which are set out in our related client note.
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EU Delegated Regulation on Ancillary Activity Criteria under MiFID II
10/21/2021
An EU Commission Delegated Regulation (2021/1833) on the criteria for when an activity will be considered as ancillary to the main business has been published in the Official Journal of the European Union. The changes to the EU’s Markets in Financial Instruments Directive, known as MiFID Quick Fix, include changes to the ancillary activity exemption. The exemption from authorization as an investment firm is available when dealing on own account, or providing investment services to clients in commodity derivatives, emission allowances or derivatives thereof, provided that the activity is an ancillary activity to their main business at group level and the main business is not the provision of investment services within the meaning of MiFID II or banking activities under the Capital Requirements Directive.
Read more.Topic : MiFID II -
UK Regulator Amends Derivatives Trading Obligation for LIBOR Transition Purposes
10/15/2021
Following its July 2021 consultation, the U.K. Financial Conduct Authority has published a Policy Statement amending the list of derivatives subject to the U.K. trading obligation for the purposes of the LIBOR transition.
The derivatives trading obligation under the U.K. version of the Markets in Financial Instruments Regulation requires U.K. investment firms to conclude transactions in certain derivatives on U.K. regulated markets, multilateral trading facilities, organised trading facilities or third-country venues in jurisdictions benefiting from U.K. equivalence decisions. In the absence of any equivalence decision, the FCA used its Temporary Transitional Power to provide transitional relief from December 31, 2020 (the end of the transition period) until March 31, 2022 for U.K. firms, EU firms using the U.K.'s temporary permissions regime and U.K. branches of overseas firms. The trading obligation currently applies to certain fixed-to-float interest rate swaps denominated in EUR, USD and GBP, and to certain index credit default swaps (iTraxx Europe Main and iTraxx Europe Crossover).
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European Securities and Markets Authority Recommends Changes to EU Algorithmic Trading Rules
09/29/2021
The European Securities and Markets Authority has published a review report on algorithmic trading under the EU's Markets in Financial Instruments package. The Markets in Financial Instruments Directive requires the European Commission to review and report on the impact of the MiFID II requirements on algorithmic trading, including high frequency trading and direct electronic access. ESMA's report will assist the Commission with that remit, including determining whether any legislative changes are appropriate.
Read more.Topic : MiFID II -
Proposed Amendments to the EU Best Execution Reporting Regime under MiFID II
09/24/2021
The European Securities and Markets Authority has launched a consultation on proposed amendments to the best execution reporting regime under the EU's Markets in Financial Instruments Directive. Responses to the consultation may be submitted by December 23, 2021. ESMA is expected to send its recommendations for amendments to the European Commission in H1 2022.
Read more.Topic : MiFID II -
UK Wholesale Market Review
07/01/2021
The U.K. government has launched a consultation, the Wholesale Markets Review, on proposals to amend the U.K.'s Markets in Financial Instruments regime. This regime is based upon the Markets in Financial Instruments Directive and related Regulation, as well as several pieces of delegated legislation thereunder, collectively and colloquially known as MiFID II, which the U.K. on-shored with minor amendments following its exit from the European Union. HM Treasury is now seeking feedback on how the U.K.’s approach to regulating secondary markets should be adapted now that the U.K. has left the EU. The intention is to amend the regime to reflect that the U.K. market is one of the largest capital markets globally. Changes are also proposed where it is clear that the rules have had unintended outcomes, are duplicative or excessive or have curbed innovation. The consultation is open until September 24, 2021.
Read more.Topic : MiFID II -
UK Taskforce on Innovation, Growth and Regulatory Reform Publishes Recommendations
06/16/2021
The Taskforce on Innovation, Growth and Regulatory Reform has published its report, making several recommendations for reforming the U.K.'s approach to regulation as well as practical suggestions for implementing the reforms. The main recommendation tasks the government with building a U.K. regulatory framework that has proportionality at its core and that is based on the principles of the common law. The report also provides specific proposals for regulatory reforms across several sectors, identified as high growth sectors, including the financial services sector. The TIGRR recommendations will be progressed by the newly established Brexit Opportunities Unit, which is being led by Lord Frost, Minister of State at the Cabinet Office. Consultations on proposals to implement these ambitious recommendations are expected later this year.
The TIGRR report recommends the approach to regulation is reformed along traditional common law lines, moving away from the EU codified system. The report suggests that the government reconsiders the approach to regulation with the aim of enhancing productivity, encouraging competition and invigorating innovation.
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UK to Remove Open Access Regime for Exchange-Traded Derivatives
06/05/2021
The U.K. Government has announced that it will permanently remove the open access regime for exchange-traded derivatives. The regime, established under the EU Markets in Financial Instruments Regulation and onshored into U.K. laws in preparation for the end of the Brexit transitional period, requires a trading venue to provide open and non-discriminatory access to a CCP, with a reciprocal requirement for CCPs to provide access for trading venues, when clearing transferable securities, money market instruments and ETDs. In the EU, a temporary opt-out from the regime was made available and then extended for trading venues and CCPs in relation to ETDs, but that is due to expire on July 3, 2021 (having been extended for a period of one year due to difficulties surrounding COVID-19).
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UK Financial Services Act 2021 Published
04/29/2021
The U.K. Financial Services Bill has received Royal Assent from Her Majesty the Queen and has become an Act of Parliament, the Financial Services Act 2021. Some provisions of the Act came into force on the date of Royal Assent, with a limited number following on June 29, 2021. The majority of the Act will come into force on a date specified in regulations yet to be made by HM Treasury.
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UK Proposals to Ease Unbundling of Research and Best Execution Rules
04/28/2021
The U.K. Financial Conduct Authority has launched a consultation on certain proposed changes to the U.K. rules on the unbundling of research and best execution reporting, which are part of the Markets in Financial Instruments Directive (as inherited from the EU). The consultation closes on June 23, 2021, and the FCA is expected to publish its response and final rules in the second half of this year. The proposals are set out in brief below. Some of these are in the same areas covered by the EU MiFID II Quick Fix Regulation, but the FCA is not copying those rules, and it goes further in most areas.
Read more.Topic : MiFID II -
UK Government Publishes Proposals for Investment Firm Prudential Regime and Implementation of Outstanding Basel III Requirements
02/04/2021
The U.K. Government has opened a consultation on the implementation of the Investment Firms Prudential Regime and the remaining Basel III Standards in the U.K. The Financial Services Bill, once it is finalized, will introduce powers for the Financial Conduct Authority and the Prudential Regulation Authority to introduce the IFPR and outstanding Basel III prudential requirements for banks. The FCA has already launched a consultation on some aspects of the IFPR and will consult on the others throughout the year. The PRA is expected to consult on implementation of Basel III in Q1 2021. HM Treasury's consultation concerns those aspects of the two regimes that will require secondary legislation under the Financial Services Bill. The consultation closes on April 1, 2021.
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UK Equivalence Decision for Swiss Exchanges Enters into Force
02/03/2021
The U.K.'s Swiss share trading obligation equivalence decision has entered into force. The equivalence decision has been made under the U.K.'s Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021, which came into force on February 3, 2021, and means that U.K. investment firms will be able to comply with the share trading obligation under the U.K. Markets in Financial Instruments Regulation by trading shares on BX Swiss AG and SIX Swiss Exchange AG.
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European Securities and Markets Authority Launches 2021 Common Supervisory Action on MiFID II Product Governance Rules
02/01/2021
The European Securities and Markets Authority has announced that during 2021 it will be conducting a common supervisory action with national competent authorities on the product governance rules under the Markets in Financial Instruments Directive. The product governance requirements require firms which manufacture and distribute financial instruments and structured deposits to act in their clients' best interests during all the stages of the life-cycle of products or services. The CSA will assess the progress of compliance with the requirements by manufacturers and distributors of financial products.
ESMA conducts CSAs to promote the convergence of application of EU rules across the EU. Following a CSA into the MiFID II appropriateness requirements, ESMA is considering introducing guidelines to promote further harmonization.
View ESMA's announcement.
View details of ESMA's proposed guidelines on appropriateness.Topic : MiFID II -
Proposed EU Guidelines on MiFID II Appropriateness Requirements
01/29/2021
The European Securities and Markets Authority has opened a consultation on proposed guidelines on the appropriateness and execution-only requirements under the Markets in Financial Instruments Directive. The appropriateness requirements under MiFID II require investment firms providing investment advice to assess a potential client's knowledge and experience in the investment field to ascertain whether a particular service or product is appropriate for the client. There are exemptions from these requirements under the execution-only framework, subject to certain conditions being met. Responses to the consultation may be submitted until April 29, 2021. ESMA is aiming to issue the final guidelines in Q3 2021.
ESMA is proposing these new guidelines to enhance convergence across the EU on the application of these requirements. The common supervisory action conducted in the second half of 2019, as well as other supervisory interactions, revealed that firms have different understandings of the appropriateness and execution-only requirements and that Member States apply them differently. The proposed guidelines will apply in full to all investment firms providing non-advised services, regardless of the means of interaction with clients.
View ESMA's consultation on proposed guidelines on the appropriateness and execution-only requirements under MiFID II.Topic : MiFID II -
EU Authority Issues Statement on Reverse Solicitation under MiFID II
01/13/2021
The European Securities and Markets Authority has issued a statement reminding firms of the rules on reverse solicitation under the Markets in Financial Instruments Directive and Regulation. MiFID II provides that EU retail or professional clients may reach outside the EU and acquire services and products from non-EU investment banks (known as "reverse solicitation") and that in these circumstances the third-country firm is exempt from the requirement to establish an EU branch. ESMA has issued the statement following what it describes as "questionable practices" materializing following the end of the Brexit transition period, where firms have purported to opt clients into "reverse solicitation" through either generic terms and conditions amendments or click-through "I agree" boxes online. It is clear from this guidance that ESMA's view is that more is needed than this to invoke the reverse solicitation regime. Notably, the ESMA report does not criticise more robust reverse solicitation protocols that are currently being seen in the market, such as a termination notice by the U.K. service provider of the existing agreement, sometimes with a covering note that the client could at its initiative reach out afresh to request entry into of a new agreement should it so desire.
View ESMA's statement on reverse solicitation.
You may like to view our client note, "On the Existence of a Pan-European Reverse Solicitation Regime Under MiFID II, and its Importance on a 'Hard' Brexit". -
UK Grants Equivalence to Swiss Exchanges for Purpose of UK Share Trading Obligation
01/13/2021
U.K. legislation has been made granting equivalence to Swiss exchanges under the U.K.'s Markets in Financial Instruments Regulation. The Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021, which enter into force on February 3, 2021, grant equivalence to two Swiss exchanges - BX Swiss AG and SIX Swiss Exchange AG. U.K. MiFIR requires U.K. investment firms to ensure that the trades they undertake in shares admitted to trading on a regulated market or traded on a trading venue take place on a regulated market, multilateral trading facility, systematic internaliser or equivalent third-country trading venue. U.K. investment firms will be able to comply with the U.K. MiFIR share trading obligation by trading shares on these Swiss exchanges.
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UK Government Seeks Input on UK Framework for Cross-Border Financial Services
12/15/2020
HM Treasury has launched a call for evidence on the U.K.'s framework for cross-border financial services. HM Treasury is considering policy approaches for ensuring the U.K. framework is fit for the future given the U.K.'s exit from the EU, including consideration of how effective and proportionate regulation can support attracting investment and liquidity to the U.K. Responses to the consultation may be submitted until March 11, 2021.
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UK Regulator Publishes Proposals for New Investment Firm Prudential Regime
12/14/2020
Following the discussion paper published earlier this year, the U.K. Financial Conduct Authority has launched its first consultation on the new U.K. Investment Firms Prudential Regime. The IFPR is a new prudential regime for U.K. firms authorized under the Markets in Financial Instruments Directive, which it is proposed will be introduced from January 1, 2022, subject to the progress of the Financial Services Bill. The IFPR is intended to simplify the prudential requirements applicable to solo-regulated U.K. investment firms. It will not apply to the larger investment firms that will remain dually regulated, that is, prudentially regulated by the Prudential Regulation Authority and regulated by the FCA for all other aspects. The consultation closes on February 5, 2021.
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EU Markets Authority Confirms Position on Derivatives Trading Obligation Post-Brexit
11/25/2020
The European Securities and Markets Authority has confirmed its position, originally proposed in March 2019, that the derivatives trading obligation under the EU Markets in Financial Instruments Regulation will continue to apply without changes, and as things stand without any U.K. equivalency, after the end of the Brexit transition period on December 31, 2020.
The derivatives trading obligation requires EU investment firms to conclude transactions in certain derivatives on EU regulated markets, multilateral trading facilities, organized trading facilities or third-country venues in jurisdictions benefiting from an EU equivalence decision. The trading obligation applies to certain fixed-to-float interest rate swaps denominated in EUR, USD and GBP and to certain index credit default swaps (iTraxx Europe Main and iTraxx Europe Crossover).
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Final Draft EU Technical Standards for SME Growth Markets Under Market Abuse Regulation
11/05/2020
The European Securities and Markets Authority has published its final report and final draft Technical Standards on the amendments to the Market Abuse Regulation for the promotion of SME Growth Markets. SME Growth Markets were a new sub-category of multilateral trading facility introduced by the revised Markets in Financial Instruments package in January 2018 to facilitate access to capital for SMEs. ESMA is mandated to prepare: (i) Regulatory Technical Standards on liquidity contracts; and (ii) Implementing Technical Standards on insider lists and to submit those to the European Commission by September 1, 2020. Due to the impact of the COVID-19 pandemic, the delivery of the final draft RTS and ITS have been delayed and ESMA acknowledges that it is unlikely that they will be adopted in time for the application of the amendments to MAR, which is January 1, 2021. The final report outlines ESMA's proposals and provides the final draft RTS and ITS that ESMA has submitted to the European Commission for consideration.
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EU Moves to Ease Brexit Implications for Post-Trade Transparency and Position Limits Regime
10/27/2020
Following its statement at the start of October 2020, the European Securities and Markets Authority has announced that U.K. trading venues have been positively assessed for the purposes of the post-trade transparency obligations and position limits regime under the Markets in Financial Instruments package. From January 1, 2021, EU investment firms will not be required to make transactions public in the EU via an EU Approved Publication Arrangement if they are executed on a U.K. trading venue that appears on ESMA's transparency list. In addition, commodity derivative contracts traded on U.K. trading venues that are on ESMA's position limits list will not be considered as economically equivalent OTC contracts and will thus not be subject to the EU position limit regime.
View ESMA's announcements and lists.
View details of ESMA's earlier statement in October.
View details of the FCA's statement on the U.K.'s position. -
EU Markets Authority Updates Post-Brexit Position on EU Share Trading Obligation
10/26/2020
The European Securities and Markets Authority has published an updated statement on the impact of Brexit on the trading obligation for shares where no decision on the U.K.'s equivalence as a third country market has been made. The EU Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e., namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The U.K. has adopted this requirement in its onshored MiFID II legislation. Similarly, following its exit from the EU, the new U.K. onshored share trading obligation would restrict the trading of shares in the U.K. to trades on U.K. trading venues unless a third-country equivalence decision was made.
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UK Parliament Publishes Financial Services Bill for Post-Brexit Regulatory Framework
10/21/2020
The U.K. Government has published a Financial Services Bill setting out a proposed regulatory framework for the financial services industry following the U.K.'s exit from the EU. The Bill is part of the U.K.'s wider initiative under the Future Regulatory Framework Review to re-frame its regulatory framework. Although Brexit has brought challenges to the financial sector, there may also be post-Brexit opportunities for the U.K. to seize. The aim of these reforms is to cement the U.K.'s position as a global financial centre of excellence. A core piece of that will be to set conditions that continue attracting business to the U.K. and to look for opportunities to cut "red tape" whilst at the same time maintaining the U.K.'s globally recognized high regulatory standards.
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UK Conduct Regulator Bans Sale to Retail Clients of Derivatives Referencing Crypto-Assets from January 2021
10/06/2020
The U.K. Financial Conduct Authority has published a Policy Statement and final rules prohibiting the sale, marketing and distribution to retail clients of derivatives and exchange traded notes referencing certain types of unregulated, transferable crypto-assets by firms acting in, or from, the U.K. The ban will apply from January 6, 2021.
The prohibition will apply to the marketing, distributing or selling of crypto derivatives in, or from, the U.K. to retail clients by MiFID investment firms, MiFID optional exemption firms, U.K. branches of third-country investment firms and to EEA MiFID investment firms that currently passport into the U.K. and which will continue operating after the Brexit transitional period ends on January 1, 2021.
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UK Conduct Regulator Confirms Post-Brexit Position on Post-Trade Transparency and Position Limits
10/02/2020
The U.K. Financial Conduct Authority has issued a statement confirming the U.K. position from January 1, 2021, for post-trade transparency reporting obligations and position limit regime under the U.K. Markets in Financial Instruments package. The FCA confirms that:- U.K. firms trading on non-U.K. trading venues will not be required to publish details of those transactions through a U.K. Approved Publication Arrangement; and
- Commodity derivative contracts traded on trading venues are not considered by the FCA to be economically equivalent OTC contracts and will not be subject to the U.K. commodity derivatives position limits regime.
The FCA's statement follows the statement made the previous day by the European Securities and Markets Authority that it intended to assess U.K. trading venues for the purpose of the EU post-trade transparency obligations and position limits regime. If ESMA assesses a U.K. trading venue positively, then trades on the venue will not need to be reported by EU investment firms through an EU APA, and they will not be subject to the position limits regime.
View the FCA's statement.
View details of ESMA's statement. -
EU to Assess UK Trading Venues to Clarify Post-Brexit Position for Post-Trade Transparency and Position Limits Regime
10/01/2020
The European Securities and Markets Authority has published updated statements on the impact of Brexit on the application of the Markets in Financial Instruments package and the EU Benchmark Regulation. ESMA issued statements in 2019 to clarify the position in a no-deal scenario. These latest statements provide updates to take into account the Withdrawal Agreement and the end of the Brexit transition period on December 31, 2020.
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Final Technical Standards on Third-Country Investment Firm Registration and Reporting Requirements
09/28/2020
The European Securities and Markets Authority has published final draft Technical Standards on the provision of investment services and activities in the EU by third-country firms under the Markets in Financial Instruments package. Amendments that were made to the MiFID II package under the Investment Firm Regulation and Directive require, among other things, third-country firms providing services to all types of clients to provide ESMA with further information. In addition, ESMA has increased powers over third-country firms providing services to eligible counterparties and per se professional clients, such as the ability to conduct on-site inspections and impose product restrictions or prohibitions. The revisions will apply from June 26, 2021.
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EU Authority Allows Further Short Delay to Annual Transparency Calculations for Non-Equities
09/07/2020
The European Securities and Markets Authority has announced the delay of the publication dates by investment firms and trading venues of the annual transparency calculations for non-equity instruments (other than bonds) from September 15, 2020 to September 21, 2020. The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation, which became effective on January 3, 2018, introduced pre- and post-trade transparency requirements for equity and non-equity financial instruments. In April 2020, ESMA postponed the publication of the annual transparency calculation for derivatives, emission allowances and structured finance products from April 30, 2020 to July 15, 2020 and their application from June 1, 2020 to September 15, 2020 in response to the coronavirus pandemic. The latest delay is made in response to industry concerns that the revised application of the non-equity transparency calculations falls during the quarterly expiry week of many equity derivatives, which usually involves high trading volumes and high volatility. ESMA is also postponing to September 21, 2020 the mandatory systematic internaliser regime for derivatives, emission allowances and structured finance products.
View ESMA's announcement.
View details of ESMA's April 2020 announcement.Topic : MiFID II -
European Commission Publishes Capital Markets Recovery Package in Response to COVID-19 Pandemic
07/24/2020
The European Commission has published a series of proposed legislative amendments to reduce the burden on financial institutions during the coronavirus pandemic in relation to their obligations under the EU Securitization Regulation, the Markets in Financial Instruments Directive and the Prospectus Regulation. The package is referred to as the Capital Markets Recovery Package and is designed to make it easier for companies to raise capital and increase banks' capacity to finance the recovery.
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UK Conduct Regulator Statement on Open Access Regime for Exchange-Traded Derivatives
07/06/2020
The U.K. Financial Conduct Authority has published an updated statement on the open access regime for trading and clearing exchange-traded derivatives. The Markets in Financial Instruments Regulation provided a temporary opt-out from the open access requirements for trading venues and clearing houses in relation to ETDs. The opt-out was due to expire on July 3, 2020. However, in light of COVID-19, the EU has announced it is postponing the implementation of the open access regime for ETDs until July 3, 2021. The FCA's statement acknowledges the EU's postponement of the regime and states that the amended open access regime will form part of retained EU law that will be transposed by the U.K. post-Brexit and will continue to apply in the U.K. after the end of the transition period.
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UK Regulator Publishes Discussion Paper on New Investment Firm Prudential Regime
06/23/2020
The U.K. Financial Conduct Authority has published a discussion paper setting out its initial views on establishing a new Investment Firm Prudential Regime. The EU introduced a new prudential regime for EU investment firms through the Investment Firm Regulation and the Investment Firm Directive, which will (mostly) apply from June 26, 2021. The U.K. encouraged the introduction of the EU IFD and IFR while it was a member of the EU. However, the U.K. will not implement the IFR and IFD into U.K. laws as they come into force after the U.K. has left the EU and after the Brexit transitional period ends.
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European Securities and Markets Regulator Publishes 2019 Annual Report and Updated 2020 Work Program
06/15/2020
The European Securities and Markets Authority has published its 2019 Annual Report together with an updated version of its 2020 Work Program, incorporating changes in response to the COVID-19 pandemic.
ESMA’s 2019 Annual Report discusses ESMA’s work in 2019, which included: (a) the entry into force of EMIR 2.2, including significant new responsibilities for ESMA in the authorization and supervision of CCPs; (b) ESMA’s common supervisory action on the application of the revised Markets in Financial Instrument Directive’s requirements on the assessment of appropriateness, for which ESMA will consider whether any follow-up work is needed in 2020; (c) reviews of MiFID II and the Markets in Financial Instruments Regulation, including on fair access to, and lowering the cost of, market data and the consolidated tape; and (d) sustainable finance, including technical advice delivered to the European Commission on the integration of sustainability risks for investment firms and investment funds into relevant EU legislation, a report on undue short-termism in securities markets and contributions to the technical expert group on sustainable finance which is due to deliver technical advice on delegated legislation relating to the EU Benchmarks Regulation.
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EU Statement on Open Access Requests for Exchange-Traded Derivatives
06/11/2020
The European Securities and Markets Authority has published a statement on the open access provisions for exchange-traded derivatives under the Markets in Financial Instruments Regulation.
MiFIR requires a trading venue to provide open and non-discriminatory access to a CCP so that a CCP can clear trades in transferable securities, money market instruments and ETDs concluded on a trading venue of their choice, which will in turn allow the members of a trading venue to select the CCP they wish to use for clearing. There is a reciprocal requirement on CCPs to provide open and non-discriminatory access to a trading venue that wishes to clear financial instruments through a particular CCP. These provisions are controversial since they mean that valuable intellectual property and IT systems developed by exchanges effectively must be made available to competitors or new market entrants. It has been argued that the open access requirements make the EU unattractive as a location for exchange businesses due to the commercial disadvantages that result for those exchanges which have successfully invested in innovation.
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Final EU Guidelines on Compliance Function Requirements Under MIFID II
06/05/2020
The European Securities and Markets Authority has published final guidelines on the compliance function requirements that are set out in the revised Markets in Financial Instruments package. The final guidelines replace ESMA's 2012 guidelines issued under MiFID I.
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European Securities and Markets Authority Publishes Updated Transparency and Position Limits Opinions for Third-Country Trading Venues
06/03/2020
The European Securities and Markets Authority has published two opinions on the application of post-trade transparency and position limits rules to third-country trading venues.
The first opinion relates to post-trade transparency requirements under the Markets in Financial Instruments Regulation. Under MiFIR, EU investment firms must publish information on transactions in financial instruments traded on an EU trading venue. ESMA’s opinion states that information about transactions concluded on a third-country trading venue should also be made public in accordance with MiFIR, but it is unnecessary for EU firms to republish such information where the transparency rules of the third-country trading venue are similar to those applicable to EU trading venues under MiFIR.
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European Securities and Markets Authority Statement on MiFID II Conduct of Business Obligations in Light of COVID-19
05/06/2020
The European Securities and Markets Authority has published a statement reminding firms of their MiFID II conduct of business obligations in light of a significant increase in investment accounts opened by retail clients, together with a surge in retail clients' trading activities.
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EU Consultation on SME Growth Markets
05/06/2020
The European Securities and Markets Authority has launched a consultation on the functioning of the small and medium-sized Growth Markets regime under the Markets in Financial Instruments Directive II and on draft technical standards for the promotion of the use of SME Growth Markets to be developed under the Market Abuse Regulation. SME Growth Markets were a new sub-category of multilateral trading facility introduced by MiFID II in January 2018 to facilitate access to capital for SMEs. The consultation closes on July 15, 2020.
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Council of the European Union Publishes Working Paper on Interoperability Arrangements and MiFIR Open Access for Exchange Traded Derivatives
04/29/2020
The Council of the European Union has published a working paper on interoperability arrangements as a source of contagion risk and open access provisions for exchange-traded derivatives under the Markets in Financial Instruments Regulation.
Interoperability arrangements are links between CCPs that involve the cross-system execution of transactions. They are relevant where multiple CCPs service the same trading venue and allow clearing members of one CCP to centrally clear trades carried out with members of another CCP, without requiring the first counterparty to be a member of the second CCP. The European Market Infrastructure Regulation contains provisions governing CCP interoperability arrangements, including the need for non-discriminatory access, adequate risk management policies and the need for prior approval of relevant national regulators.
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EU Delays Publication Dates for Annual Transparency Calculations for Non-Equities
04/09/2020
The European Securities and Markets Authority has issued a public statement announcing the delay of the publication dates of the annual transparency calculations for non-equity instruments. ESMA's statement is made in response to the impact of the coronavirus. The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation, which became effective on January 3, 2018, introduced pre- and post-trade transparency requirements for equity and non-equity financial instruments. ESMA is postponing the publication of the annual transparency calculation for derivatives, exchange traded commodities, exchange traded notes, emission allowances and structured finance products from April 30, 2020 to July 15, 2020 and their application from June 1, 2020 to September 15, 2020. The transitional transparency calculations will continue to apply until September 14, 2020 (inclusive). The publication and application of the annual transparency calculations for bonds remain unchanged. The new thresholds will be applicable from June 1, 2020.
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UK Conduct Regulator Dear CEO Letter to Firms on Consumer Protection During COVID-19 Pandemic
03/31/2020
The U.K. Financial Conduct Authority has published a Dear CEO letter addressed to firms providing services to retail investors on the actions they should be taking to protect consumers during the COVID-19 pandemic. Firms are expected to provide strong support and service to consumers, to be transparent with their customers and to report to the FCA immediately if they foresee themselves getting into financial difficulty.
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European Securities and Markets Authority Encourages Regulatory Forbearance for Best Execution Reporting in Light of COVID-19
03/31/2020
The European Securities and Markets Authority has published a statement encouraging national regulators to deprioritize supervisory actions against firms that fail to meet best execution reporting deadlines under the revised Markets in Financial Instruments Directive. The MiFID II best execution requirements oblige investment firms to obtain the best possible result for their clients when executing client orders, and require execution venues and investment firms to make data relating to the quality of execution of transactions publicly available.
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European Securities and Markets Authority Maintains MiFID II Equity Transparency Calculations Application Date
03/27/2020
The European Securities and Markets Authority has issued a statement in which it confirms that the existing date for the application of the equity transparency calculations will remain unchanged. The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation, which became effective on January 3, 2018, introduced pre- and post-trade transparency requirements for equity and non-equity financial instruments. On February 28, 2020, ESMA published the transparency calculations that will apply to new instruments from April 1, 2020 until March 31, 2021. Further calculations will be released ahead of that date once the data quality review for those instruments has been completed.
ESMA's statement confirms that the new calculations will apply from April 1, 2020, as intended, because firms have had to implement new transparency calculations in the past and so do not need to revise their IT systems to comply with the obligation. In addition, ESMA is of the view that a delay could negatively impact those firms that have planned for the new calculations.
View ESMA's statement.
Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Centre. -
European Securities and Markets Authority Announces MiFID II Tick-Size Regime Forbearance
03/20/2020
The European Securities and Markets Authority expects national regulators to de-prioritize their supervision of the new tick-size regime for systematic internalizers under the Markets in Financial Instruments Regulation in light of the challenges posed by COVID-19. Amendments to the MiFIR tick-size regime were introduced by the Investment Firms Regulation and are due to come into effect on March 26, 2020. ESMA's statement demands that national regulators do not prioritize supervisory actions in relation to the new regime from March 26, 2020 until June 26, 2020.
View ESMA's statement on regulatory forbearance for new tick-size regime.
View details of the Investment Firms Regulation. -
COVID-19: European Securities and Markets Authority Extends Consultation Deadlines
03/20/2020
The European Securities and Markets Authority has announced that it is extending the consultation response dates to assist market participants as they implement arrangements to ensure business continuity during the coronavirus outbreak.
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COVID-19: European Securities and Markets Authority Clarifies MiFID II Telephone Recording Requirements
03/20/2020
The European Securities and Markets Authority has published a statement on the telephone recording obligations in the Markets in Financial Instruments Directive. MiFID II requires records to be kept of all services, activities and transactions undertaken by an investment firm, including recordings of telephone conversations or electronic communications relating to: (i) transactions concluded when a firm deals on own account (proprietary trading); and (ii) the provision of client order services that relate to the reception, transmission and execution of client orders. Firms are also required to implement and maintain a policy for the recording of these telephone conversations.
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European Commission Consults on MiFID II
02/17/2020
The European Commission has launched a consultation on reviewing the EU Markets in Financial Instruments package. The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation have applied across the EU since January 1, 2018 and regulate the functioning and transparency of EU financial markets. The consultation closes on May 18, 2020. The Commission is due to publish a legislative proposal to amend MiFID II and MiFIR in Q4 2020.
Read more.Topic : MiFID II -
EU Recommendations for Alignment of the EU Derivatives Trading and Clearing Obligations
02/07/2020
The European Securities and Markets Authority has published a final report and recommendations on aligning the trading obligation under the Markets in Financial Instruments Regulation with recent changes made to the clearing obligation under the European Markets Infrastructure Regulation by the EMIR Refit Regulation. ESMA's report to the European Commission will support the Commission's report to the European Parliament and Council that is due by December 18, 2020.
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EU-Wide Supervisory Focus on MiFID II Suitability Compliance
02/05/2020
The European Securities and Markets Authority has announced an EU-wide common supervisory action in 2020 on the application of the suitability requirements under the Markets in Financial Instruments Directive. National regulators of EU member states will simultaneously assess compliance with the applicable requirements by market participants established in their jurisdictions. The knowledge and experience of the national regulators will be shared through ESMA to enhance the convergence of supervisory practices. ESMA's Suitability Supervisory Briefing and Suitability Guidelines are relevant to this initiative.
View ESMA's announcement.
View details of ESMA's suitability supervisory briefing.
View details of ESMA's suitability guidelines.Topic : MiFID II -
EU Recommendations on MiFID II Product Intervention Amendments
02/04/2020
The European Securities and Markets Authority has published Technical Advice on the impact and functioning of the product intervention rules in the Markets in Financial Instruments Regulation. MiFIR gives ESMA powers temporarily to prohibit or restrict the marketing, distribution or sale of financial instruments or types of financial activity. The European Banking Authority has similar powers in relation to certain structured deposits. National regulators of EU Member States are able to impose permanent product intervention measures. ESMA's Technical Advice to the European Commission is on the functioning of the MiFIR provisions and their impact, taking into account its experience and the feedback from market participants to its Call for Input last year.
Read more.Topic : MiFID II -
EU Consultation on Potential Amendments to MiFID II's Equity Transparency Regime
02/04/2020
The European Securities and Markets Authority has commenced a consultation on proposed amendments to the provisions of the Markets in Financial Instruments package on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligation for shares. The consultation is part of the larger review on the implementation of the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation. Feedback to the consultation will aid ESMA in preparing its report to the European Commission, which in turn is expected to report in 2020 to the European Parliament and Council of the European Union. ESMA's consultation closes on March 17, 2020. It intends to publish its final report to the Commission in July 2020. ESMA will be consulting separately on the transparency regime for non-equity instruments, such as bonds and derivatives.
Read more.Topic : MiFID II -
European Securities and Markets Authority Consults on Pre-Trade Transparency Regime
02/03/2020
The European Securities and Markets Authority has launched a consultation to collect the views of market participants on the pre-trade transparency regime applicable to systematic internalizers for “non-equity instruments” (which include bonds, structured-finance products, emission allowances and derivatives) under the Markets in Financial Instruments Regulation. A consultation on the transparency regime for equity and equity-like instruments has been launched separately.
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EU Consultation on Draft Technical Standards For Third-Country Firm Registration and Disclosure Under MiFID II
01/31/2020
The European Securities and Markets Authority has launched a consultation on proposed draft Technical Standards on the provision of investment services and activities in the EU by third-country firms under the Markets in Financial Instruments package. The consultation closes on April 28, 2020 and ESMA intends to submit the final draft Technical Standards to the European Commission in Q3 2020.
The provisions in the Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation on third-country firms were recently amended. Among other things, the changes require third-country firms providing services to all types of clients to provide ESMA with further information. In addition, ESMA has increased powers over third-country firms providing services to eligible counterparties and per se professional clients, such as the ability to conduct on-site inspections and impose product restrictions or prohibitions.
ESMA's consultation paper covers the proposed:- draft Regulatory Technical Standards on the information for registration of third-country firms and the information to be reported annually by third-country firms registered with ESMA;
- draft Implementing Technical Standards on the format of applications for registration of third-country firms and the format of the information to be reported annually; and
- draft ITS on the format of the information to be reported annually to national regulators by branches of third-country firms.
View the consultation paper. -
UK Conduct Regulator Wants Asset Management Sector to Reflect on Risks to Customers and Markets
01/22/2020
The U.K. Financial Conduct Authority has published two letters addressed to the CEOs of firms in the asset management and funds sectors. The first letter is addressed to CEOs of FCA-authorized firms directly managing mainstream investment vehicles or advising on mainstream investments, excluding wealth managers and financial advisers. The second letter is addressed to CEOs of FCA-authorized firms managing alternative investment vehicles, such as hedge funds or private equity funds, or managing alternative assets directly or advising on these types of investments. The letters follow the FCA's report on its review of how firms in the asset management sector selected and used risk modeling and other portfolio management tools.
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UK Conduct Authority to Review Suitability of Retirement Income Financial Advice
01/21/2020
The U.K. Financial Conduct Authority has announced the focus of its second review assessing suitability - advice received by consumers on retirement income. The FCA intends to publish a report on the outcome of the review in 2020. Alongside the announcement, the FCA has published a letter addressed to the CEOs of financial advice firms describing its approach to tackling key areas of concern with financial advice firms and setting out the action it expects these firms to undertake. The letter covers assessing suitability of advice, defined benefit pension transfer advice, pensions and investment scams, adequate financial resources and professional indemnity insurance, the FCA's recently imposed ban on the promotion of speculative mini-bonds to retail consumers, the Senior Managers and Certification Regime and preparing for the end of the Brexit implementation period.
View the FCA's statement.
View the Dear CEO letter. -
UK Conduct Authority Halts UK Operation of MiFID Transparency Regime in Light of Commitment to Brexit Deal
01/20/2020
The U.K. Financial Conduct Authority has updated its webpage and statement on the operation of the transparency regime under the Markets in Financial Instruments Directive post-Brexit. The U.K. Government has stated that it is committed to leaving the EU with a deal on January 31, 2020, followed by an implementation period. As a result, the FCA confirms that during the implementation period, all MiFID systems will remain connected to the European Securities and Markets Authority. A further update will be provided in due course.
View the FCA's updated statement. -
International Organization of Securities Commissions Recommends UTC Clock Synchronization to Facilitate Market Abuse Monitoring
01/16/2020
The International Organization of Securities Commissions has published a report in which it recommends that where jurisdictions require clock synchronization for trading purposes, clocks should be synchronized to Coordinated Universal Time (UTC). In its 2013 report - Technological Challenges to Effective Market Surveillance – Issues and Regulatory Tools (FR04/13) – IOSCO recommended the introduction of a requirement for trading venues and their participants to synchronize the business clocks used to record the date and time of a reportable event. The practice assists regulators in monitoring the markets for market abuse and identifying market abuse. Certain jurisdictions have already implemented clock synchronization according to UTC, including Australia, Canada and the EU.
View IOSCO's report. -
New EU Regulation Enhances European Supervisory Authorities' Powers
12/27/2019
An EU Regulation has been published amending the European Supervisory Authorities' powers under various pieces of EU legislation. The Regulation grants ESMA additional powers to monitor market data and authorize benchmark administrators under the Markets in Financial Instruments Regulation and the Benchmarks Regulation, respectively. It also amends the legislation founding the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority, granting them additional powers to facilitate their supervisory duties. The Regulation will enter into force on December 30, 2019. The provisions regarding ESMA's enhanced supervisory powers over market data and benchmarks will apply from January 1, 2022. All other provisions regarding the European Supervisory Authorities' enhanced powers will apply from January 1, 2020.
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EU Political Agreement on Proposed Regulation on Cross-Border Crowdfunding Service Providers
12/19/2019
The EU legislative bodies have announced that political agreement has been reached on the proposed Regulation on European Crowdfunding Service Providers for Business. The proposed ECSP Regulation is part of the EU Capital Markets Union initiative and the Commission's FinTech Action Plan. It aims to increase access to finance through crowdfunding for innovative companies, start-ups and SMEs. The European Commission published the original legislative proposal on March 8, 2018. Since then, the text of the proposed ECSP Regulation has been amended.
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EU Recommendations to Combat Undue Short-Term Pressure From Financial Sector on Corporates
12/18/2019
The European Supervisory Authorities have each published advice to the European Commission on undue short-term pressure from the financial sector on corporations. The ESAs comprise the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. The ESAs' advice responds to the European Commission's request in June 2019 for evidence and possible advice on potential undue short-term pressure by financial service participants on corporations. The Commission asked the ESAs to: (i) provide evidence of any short-termism and, if any, the consequences thereof; (ii) assess the drivers of such short-termism, including the effects of regulation on financial market participants, for example, the guidance on remuneration practices; (iii) identify existing regulations that either mitigate or exacerbate short-term pressures; and (iv) evaluate the need for regulatory or policy action and propose specific areas where action is needed. The ESAs' advice, summarized below, may result in the Commission proposing amendments to several pieces of EU legislation, such as the Capital Requirements Directive and related Regulation, the Markets in Financial Instruments package and the Non-Financial Reporting Directive.
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EU MiFID II Review: First Review Report on Prices for Market Data and on the Consolidated Tape
12/05/2019
Following its consultation earlier this year, the European Securities and Markets Authority has published a report on the development of prices for market data and on the consolidated tape for equity. The report is the first review report on the implementation of the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation and will assist the Commission in preparing its reports to the European Parliament and Council of the European Union, which are expected in 2020.
Read more.Topic : MiFID II -
US Securities and Exchange Commission Extends No-Action Relief for MiFID II Inducements and Research
11/08/2019
The U.K. Financial Conduct Authority has welcomed the U.S. Securities and Exchange Commission’s extension of no-action relief addressing a potential conflict between U.S. regulation and the inducements and research provisions of the revised Markets in Financial Instruments Directive. One of MiFID II’s objectives is to give investors transparency into the cost of both research and trading commissions by requiring payments for these elements to be unbundled.
Read more.Topic : MiFID II -
EU Consultation on Changes to Position Limits for Commodity Derivatives
11/05/2019
Following its Call for Evidence issued in May this year, the European Securities and Markets Authority has launched a consultation on proposed revisions to the legal framework for position limits and position management in commodity derivatives. The position limits regime was introduced by the revised Markets in Financial Instruments Directive. MiFID II requires the European Commission to report to the European Parliament and the Council on the impact of the application of position limits and position management on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets. ESMA must provide the Commission with advice regarding this new regime to support the Commission's preparation of the report, including any recommendations for changing the legislative requirements. Responses to ESMA's consultation should be submitted by January 8, 2020.
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UK Conduct Regulator Postpones Implementation Date for Brexit Contingency Plans
10/30/2019
The U.K. Financial Conduct Authority has extended the date by which firms must implement Brexit contingency plans following the extension of the Brexit deadline from October 31, 2019 to January 31, 2020. Firms and funds should now notify the FCA for entry into the temporary permissions regime by January 30, 2020 and fund managers have until January 15, 2020 to notify the FCA if they wish to change their existing notification. Firms should continue to comply with transaction and trade reporting requirements under the Markets in Financial Instruments Directive and European Market Infrastructure Directive, respectively.
View the FCA's statement on contingency planning deadlines. -
European Securities and Markets Authority Issues Public Statements on No-Deal Brexit Preparations
10/07/2019
The European Securities and Markets Authority has issued four public statements on its preparations for a no-deal Brexit in the event the U.K. fails to agree a deal with the EU or extend the Brexit deadline before October 31, 2019. In its public statement on preparations for a possible no-deal Brexit, ESMA notes that it had already put in place no-deal contingency plans ahead of the U.K.’s previous Brexit deadline extension on April 10, 2019.
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UK Regulator Update on the Operation of the MiFID Transparency Regime Post-Brexit
10/07/2019
The U.K. Financial Conduct Authority has published an update to the Supervisory Statement on the operation of the transparency regime under the Markets in Financial Instruments Directive post-Brexit. The FCA published a statement on March 14, 2019 on the operation of the MiFID II transparency regime should the U.K. leave the EU without a deal on March 29, 2019. The FCA has updated the statement to reflect how the regime would work if the U.K. leaves the EU on October 31, 2019, without a deal.
View the FCA's update.
View details of the FCA's March 2019 Supervisory Statement. -
European Securities and Markets Authority Consults on Alignment of EU Trading and Clearing Obligations
10/04/2019
The European Securities and Markets Authority has published a consultation paper on aligning the trading obligation under the Markets in Financial Instruments Regulation with the recent changes made to the clearing obligation under the European Markets Infrastructure Regulation by the EMIR Refit Regulation. Responses to the consultation should be submitted by November 22, 2019. ESMA intends to submit its final report to the European Commission in early 2020, with the Commission’s report to the European Parliament and Council expected by December 18, 2020.
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European Securities and Markets Authority Publishes Opinion on MiFID II Frequent Batch Auctions and Double Volume Cap
10/04/2019
The European Securities and Markets Authority has published an opinion on frequent batch auctions and the double volume cap mechanism. The opinion follows ESMA’s report, published in June this year, reviewing firms’ use of frequent batch auctions and their potential as a means of circumventing the double volume cap and transparency requirements under the Markets in Financial Instruments Regulation and Markets in Financial Instruments Directive II.
Read more.Topic : MiFID II -
European Securities and Markets Authority Publishes 2020 Work Priorities
10/01/2019
The European Securities and Markets Authority has published its Annual Work Programme for 2020. The Work Programme sets out ESMA’s focus areas for 2020 and provides details of expected outputs within each of the areas. In 2019, the European Council, Parliament and Commission agreed on new tasks for ESMA, meaning that ESMA will take on an enhanced role in areas including direct supervision, supervisory convergence and investor protection. The final Regulations amending the scope of the European Supervisory Authorities’ work mandates are expected to be published in the second half of 2019.
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European Securities and Markets Authority Issues Call for Evidence on Product Intervention Measures
09/30/2019
The European Securities and Markets Authority has issued a call for evidence on the impact of its product intervention powers prohibiting the marketing, distribution and sale of binary options to retail clients and imposing restrictions upon contracts for difference that were marketed, distributed or sold to retail clients. ESMA is seeking feedback from all interested stakeholders, in particular investment firms and banks providing investment services (particularly those that provide CfDs or binary options captured by the product intervention measures) and consumer groups and investors. Responses should be submitted by November 4, 2019.
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International Organization of Securities Commissions Review of Suitability Requirements for Complex Products
09/26/2019
The International Organization of Securities Commissions has published a report, "Thematic Review on Suitability Requirements with respect to the Distribution of Complex Financial Products". The report summarizes the outcome of the review IOSCO undertook of a sample of member jurisdictions' implementation of the IOSCO 2013 Suitability Requirements for the Distribution of Complex Financial Products, which aims to prevent mis-selling of complex products. The Suitability requirements comprise nine principles relating to classification of customers, general duties regardless of customer classification, disclosure requirements, customers protections, incentives and enforcement.
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No-Deal Brexit Uncertainty Leads EU to Suspend Assessment of Transparency Requirements on Bond Markets
09/24/2019
The European Securities and Markets Authority has confirmed in a letter to the European Commission that it considers it inadvisable to conduct an annual review in 2019 of the Regulatory Technical Standards on the transparency requirements for trading venues and investment firms for bonds, structured finance products, emission allowances and derivatives (sometimes referred to as RTS 2). The requirement for an annual review is stipulated in the Markets in Financial Instruments package, and ESMA's report could lead to legislative changes subjecting more bonds and derivatives to the transparency requirements. ESMA's assessment of RTS 2 would be impacted by the uncertainty arising from Brexit, in particular, the potential for a no-deal Brexit, because the outcome would vary depending on whether U.K. data was included or not.
ESMA intends to conduct its annual review before July 2020 and to determine the impact on bond market liquidity of the U.K.'s departure from the EU.
View ESMA's letter to the European Commission. -
UK Conduct Authority Publishes Review Findings for EU Research Unbundling Rules
09/19/2019
The U.K. Financial Conduct Authority has published the outcome of its review of the research unbundling reforms implemented in the EU by the revised Markets in Financial Instruments Directive. MiFID II has applied across the EU since January 3, 2018. MiFID II restricts the payment or receipt of all fees, commission and non-monetary benefits ("inducements") unless these enhance the quality of service provided to a client, and do not impair an EU investment firm's duty to act in the best interests of its client. Any inducement that is a minor, non-monetary benefit is exempt from the limitation. Research provided by any third party (regardless of location) to an EU investment firm providing investment services or ancillary services will be regarded as an "inducement" and subject to the inducement prohibition, unless the research is received in return for either direct payment by the investment firm out of its own resources or payment from a separate research payment account (RPA). "Soft dollar" commissions are not allowed, unless these are done through an RPA. The rules have impacted buy-side and sell-side firms in the EU, as well as their non-EU counterparts.
Read more.Topic : MiFID II -
EU Restrictions on Contracts for Difference Lifted in Wake of National Measures
07/31/2019
The European Securities and Markets Authority has announced that it will not again renew its product intervention measure for Contracts for Differences. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU. ESMA's first restrictions on the marketing, distribution and sale of CfDs to retail clients applied from August 1, 2018 and was then extended every three months because ESMA did not consider that the consumer protection risk had been addressed. ESMA's view is that because most national regulators in EU member states have now adopted permanent measures, its own temporary restrictions do not need to be extended. The U.K. Financial Conduct Authority has imposed permanent restrictions on the sale, marketing and distribution of CfDs and CfD-like options to retail consumers. The rules will apply to all CfDs entered into from August 1, 2019, and to CfD-like options entered into from September 1, 2019.
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UK Regulator Provides Guidance on Regulatory Perimeter and Crypto-Assets
07/31/2019
The U.K. Financial Conduct Authority has published a Policy Statement and final Guidance on Crypto-assets. The Policy Statement summarizes the feedback received to the FCA's consultation on draft Guidance and sets out the FCA's response to that feedback. The final Guidance is, for the most part, the same as that on which the FCA consulted, except the FCA has made some drafting changes to provide further clarity and has added some guidance on stablecoins and airdrops. In addition, the FCA has revised the taxonomy by making a distinction between: (i) unregulated tokens, which are exchange tokens and utility tokens; and (ii) regulated tokens, which are security and e-money tokens.
The Guidance is intended to clarify the FCA's expectations for firms carrying on crypto-asset activities within the U.K. by providing insight for market participants on whether certain crypto-assets are within the FCA's regulatory perimeter or are otherwise regulated. The FCA highlights that the Guidance should be used by firms to understand the regulatory status of their crypto-asset activities, but assessing whether a crypto-asset or related activity is within the regulatory perimeter can only be done on a case-by-case basis. Firms should also refer to the FCA's Perimeter Guidance Manual (PERG) in its Handbook, and where firms need further clarification, they should contact the FCA and/or obtain external legal advice.
The Guidance provides an overview of the U.K. regulatory perimeter and discusses relevant concepts, such as "by way of business." It also refers to the territorial scope of the regulatory perimeter, referring to the detailed guidance in PERG and highlighting that where part of an activity is carried on outside the U.K., a firm may still be carrying on a regulated activity in the U.K.
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EU Call for Evidence on the Impact of the Inducements and Charges Disclosure Requirements Under MiFID II
07/17/2019
The European Securities and Markets Authority has launched a call for evidence on the impact of the inducements and costs and charges disclosure requirements under the revised Markets in Financial Instruments Directive. MiFID II restricts the payment or receipt of all fees, commissions and non-monetary benefits (which are defined as so-called "inducements") unless these enhance the quality of service provided to a client and do not impair an EU investment firm's duty to act in the best interests of its client. EU investment firms are obliged to disclose to each client all fees, commissions and non-monetary benefits received by them in connection with any investment service provided by them to that client.
Read more.Topic : MiFID II -
EU Report on Sanctions and Measures Imposed under MiFID II in 2018
07/17/2019
The European Securities and Markets Authority has published a report on enforcement actions taken across the EU for breach of the revised Markets in Financial Instruments package. The report covers administrative sanctions and measures as well as criminal sanctions in aggregated form for 2018. ESMA notes that the data is limited because MiFID II has only applied since January 3, 2018, and some Member States were late in applying the requirements. Therefore, ESMA does not believe that it is possible to detect any trends using the limited data. ESMA will produce the same report annually, based on the submission of information from national regulators.
View the report. -
EU Consultation on Guidelines on Compliance Function Requirements under MiFID II
07/15/2019
The European Securities and Markets Authority has published a consultation paper on proposed guidelines on the compliance function requirements that are set out in the revised Markets in Financial Instruments package. The consultation closes on October 15, 2019 and ESMA intends to publish its final guidelines in Q2 2020. The final guidelines will replace ESMA's guidelines that were issued in 2012 under MiFID I because some of the 2012 guidelines are now set out in MiFID II or its secondary legislation and so reflect the enhanced role of the compliance function under MiFID II.
Read more.Topic : MiFID II -
EU Evaluates MiFID II's Success in Improving Trade Data Quality, Availability and Costs
07/12/2019
The European Securities and Markets Authority has launched a consultation on the development of pre- and post-trade transparency data and the functioning of the consolidated tape for equity instruments under the revised Markets in Financial Instruments package. The consultation paper sets out ESMA's initial views, taking into account feedback received during earlier roundtables and questionnaires. Responses to the consultation should be provided by September 6, 2019. ESMA will consider the feedback it receives in preparing its final report, which it intends to submit to the European Commission in December 2019. The final report will assist the Commission in preparing its review reports to the European Parliament and Council of the European Union, which are expected to be published in 2020.
Read more.Topic : MiFID II -
EMIR Refit: EU Clarification on Derivatives Trading and Clearing Obligations
07/12/2019
The European Securities and Markets Authority has issued a Statement clarifying the application and interaction of the EU derivatives clearing and trading obligations following the entry into force of the revised European Market Infrastructure Regulation, known as EMIR Refit.
EMIR Refit has, subject to limited exceptions, applied directly across the EU since June 17, 2019. EMIR Refit amended the definition of a Financial Counterparty, bringing central securities depositories authorized under the EU Central Securities Depositories Regulation within scope and categorizing all Alternative Investment Funds as FCs (or, for non-EU funds, as third-country entities equivalent to FCs). It also introduced a clearing threshold for FCs, meaning that small FCs are exempt from the clearing obligation. In addition, Non-Financial Counterparties that meet the clearing threshold no longer must clear all derivatives that they enter that are subject to the clearing obligation, but only those derivatives in the asset class for which they have exceeded the threshold.
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Firms Criticized for Non-Compliance with the EU Contracts For Difference Product Intervention Measures
07/11/2019
The European Securities and Markets Authority has published a Statement cautioning contracts for difference providers to comply with its temporary product intervention measure restricting the marketing, distribution or sale of CfDs to retail clients. The measure is due to expire at the end of the day on July 31, 2019, unless ESMA again renews it.
In its Statement, ESMA states that it has noticed and is concerned that certain firms are not complying with the temporary CfD restriction or any similar permanent national measure. ESMA reminds firms that the temporary CfD restriction does not apply to eligible counterparties or professional clients, including to retail clients who opt to being treated as professional clients, as defined in the revised Markets in Financial Instruments Directive. However, firms must comply with the MiFID II requirements when dealing with a retail client that requests to opt up to being treated as a professional client, including by alerting clients to the loss of protection afforded by the temporary CfD restriction. ESMA also reminds firms that they should not incentivize a retail client to become a professional client by using language that promotes the status or benefits of professional clients.
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UK Conduct Regulator Proposes Banning the Sale to Retail Clients of Derivatives Referencing Crypto-Assets
07/03/2019
The U.K. Financial Conduct Authority has launched a consultation proposing to restrict the sale, marketing and distribution of derivatives and exchange-traded notes that reference certain types of unregulated, transferable crypto-asset to all retail clients by firms in, or from, the U.K. The FCA consultation follows the final report of the U.K. Crypto-Assets Task Force in October 2018. The FCA's view is that although the U.K.'s market in crypto-assets is relatively small, there is still a consumer protection issue that needs to be addressed.
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UK Regulator Justifies Ignoring EU Opinion on CfD Rules
07/02/2019
The U.K. Financial Conduct Authority has published a statement setting out its reasons for failing to act in accordance with the European Securities and Markets Authority's Opinion on the FCA's measures restricting the sale of Contracts for Difference and CfD-like options to retail customers. Where a national regulator takes product intervention measures under the Markets in Financial Instruments Regulation, ESMA must adopt an opinion on whether those measures are justified and proportionate. If ESMA's opinion states that the measures are not justified and proportionate and a national regulator declines to take action on the basis of ESMA's opinion, the national regulator must immediately publish a statement on its website explaining why it has adopted that course of action.
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EU to Lift Temporary Ban on the Sale of Binary Options to Retail Clients in Wake of National Measures
07/01/2019
The European Securities and Markets Authority has ended its temporary prohibition on the marketing, distribution or sale of binary options to retail clients. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU.
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UK Regulator Publishes Rules Restricting Sale of Contracts for Difference and Related Options
07/01/2019
The U.K. Financial Conduct Authority has published the Conduct of Business (Contracts for Difference) Instrument 2019, implementing product intervention measures designed to restrict the sale, marketing and distribution of contracts for difference and contract for difference-like options to retail consumers. The rules will affect: (i) retail clients who invest, or may invest, in CFDs and CFD-like options; (ii) investment firms caught by the provisions of the Markets in Financial Instruments Directive (including those caught by the Capital Requirements Directive, where appropriate) that are involved in marketing, distributing or selling CFDs and CFD-like options in, or from, the U.K. to retail clients; and (iii) U.K. branches of third-country investment firms that are involved in marketing, distributing or selling CFDs or CFD-like options to retail clients.
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European Commission Publishes Commission Delegated Regulation Amending Registration Conditions for SME Growth Markets
06/21/2019
An amending Commission Delegated Regulation to the existing Commission Delegated Regulation (Regulation 2017/565) on requirements for participants in SME growth markets has been published in the Official Journal of the European Union. Regulation 2017/565 supplements related provisions under the Markets in Financial Instruments Directive, which establishes "SME growth markets" as a new type of trading venue for small and medium sized enterprises.
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UK FICC Markets Standards Board Announces Consultation on Draft Statement of Good Practice
06/20/2019
The U.K. FICC Markets Standards Board has published a Transparency Draft of its new Statement of Good Practice on Conflicts of Interest. The Statement aims to provide guidance for participants in the fixed income, currencies and commodities markets on ways to identify and manage risks arising from conflicts of interest in the FICC markets. The guidance is particularly targeted at firms operating in Europe and the conflicts that may arise from the sale and trading of publicly listed or over-the-counter securities or financial instruments.
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UK Conduct Regulator Publishes Dear CEO Letter on its Wealth Management and Stockbroking Supervision Strategy
06/13/2019
The U.K. Financial Conduct Authority has published a "Dear CEO" letter addressed to wealth management and stockbroking firms, identifying the key areas of focus for its two-year Wealth Management and Stockbroking supervision strategy. In the letter, the FCA identifies the four key types of harm for customers in this sector as: (i) reductions in savings and investments due to fraud, investment scams and inadequate client money or assets controls; (ii) loss of confidence in the industry due to mismanagement of conflicts of interest and market abuse; (iii) reductions in savings and investments due to substandard order handling procedures and execution processes; and (iv) inability to understand the costs of services provided by firms as a result of insufficient or inaccurate disclosure.
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European Securities and Markets Authority Publishes Final Report on Frequent Batch Auctions
06/11/2019
The European Securities and Markets Authority has published a final report presenting the feedback to its November 2018 call for evidence, which sought to improve its understanding of "frequent batch" auction systems and their use in the circumvention of the "double volume cap" imposed under the Markets in Financial Instruments Regulation and transparency requirements under the revised Markets in Financial Instruments Directive (or MiFID II). ESMA intends to produce further guidance on areas highlighted in the report, particularly focusing on price determination and pre-trade transparency, and will review the broader effects of the MiFID II transparency regime.
Read more.Topic : MiFID II -
European Securities and Markets Authority Launches Common Supervisory Action on MiFID II Appropriateness Rules
06/03/2019
The European Securities and Markets Authority has announced that it will launch a common supervisory action in the second half of 2019 on the application of the appropriateness requirements under the revised Markets in Financial Instruments Directive. The action will be undertaken as part of ESMA's mandate to build a culture of common supervision among EU national regulators.
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Revised EU Statement on the Share Trading Obligations in a No-Deal Brexit
05/29/2019
Following concerns regarding its March 19, 2019 statement, the European Securities and Markets Authority has published a revised statement on the impact of a no-deal Brexit on the trading obligation for shares where no decision on the U.K.'s equivalence as a third country market has been made. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The U.K. has adopted this requirement in its onshored MiFID II legislation. Similarly, following its exit from the EU, the new U.K. on-shored share trading obligation would restrict trading of shares in the U.K. to trades on U.K. trading venues unless a third-country equivalence decision was made.
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EU Authority Asks for Feedback on the MiFID II Position Limits Regime for Commodity Derivatives
05/24/2019
The European Securities and Markets Authority has published a Call for Evidence on position limits and position management in commodity derivatives introduced by the revised Markets in Financial Instruments Directive. MiFID II requires the European Commission to report to the European Parliament and the Council on the impact of the application of position limits and position management on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets. ESMA has been asked to provide the Commission with advice regarding this new regime to support the Commission's preparation of the report.
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European Commission Investigates Anti-Competitive EU Loan Syndication
05/05/2019
A report examining competition within the European syndicated loan market has been published, following a call by the European Commission for an examination of the sector. The report was prepared at the request of the Commission by consultancy firm Europe Economics with input from boutique competition law firm Euclid Law.
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EU Technical Advice on Incorporating Sustainability Factors Into EU Regulation
05/03/2019
The European Securities and Markets Authority has published its final report and technical advice to the European Commission on incorporating sustainability risks and factors into European regulation. The European Commission sought advice from ESMA and the European Insurance and Occupational Pensions Authority in July 2018 on the introduction of environmental, social and governance considerations into the Markets in Financial Instruments Directive II, the Insurance Distribution Directive, the Alternative Investment Fund Managers Directive, the Undertakings for Collective Investment in Transferable Securities Directive and the Solvency II Directive. The introduction of sustainability considerations into European regulation sits against the backdrop of the European Commission's Sustainability Action Plan, which aims to encourage sustainable investment and mitigate climate change risk in line with the 2016 Paris Agreement and UN 2030 Agenda for Sustainable Development. In response, ESMA opened consultations seeking input from stakeholders, which closed on February 19, 2019.
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Further Extension of the EU Contracts for Difference Product Intervention Measures
04/30/2019
The European Securities and Markets Authority has issued a Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients. This has now been published in the Official Journal of the European Union. ESMA announced on March 27, 2019, that the existing restriction would be extended on the same terms as the previously implemented temporary restrictions. The CfD Decision applies directly across the EU from May 1, 2019, for a period of three months.
View the decision. -
UK Regulator Delays Final Product Intervention Measures on Contracts for Difference
04/26/2019
The Financial Conduct Authority has published a statement on the delay to publication of final rules for contracts for difference products and CfD-like options. The FCA has consulted on its proposals to make European Securities and Markets Authority's temporary product intervention measures permanent in the U.K. The FCA's proposed interventions are the same in substance as ESMA's, although it is also proposing to apply its rules to closely substitutable products and on extending these measures to exchange-traded derivatives. The consultation closed on February 7, 2019.
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EU FOREX Broker Faces Proceedings in Czech Courts Brought by "Consumer" Client Following EU Opinion
04/24/2019
Individuals who act outside their trade or profession when instructing brokers to execute FOREX contracts on their behalf must be regarded as "consumers" for the purposes of the Recast Brussels Regulation, according to a recent opinion issued by the Advocate General of the Court of Justice of the European Union. This applies regardless of the expertise of the individual or their active involvement in placing orders. Under the Recast Brussels Regulation (which governs jurisdiction between EU member states), "consumers" are entitled to bring proceedings before the court of the Member State in which they are domiciled, as opposed to being obliged to rely on the courts of the respondent counterparty's Member State.
In this case, the claimant, a student domiciled in the Czech Republic, had entered into an agreement for the execution of contracts for difference in the FOREX market via Cypriot brokerage company FIBO Group Holdings Ltd. The agreement was expressly subject to the jurisdiction of the Cypriot courts. The claimant brought a claim in the Czech court, alleging that FIBO had been unjustly enriched when the claimant's instructions to close out a position in U.S. dollars were not acted on promptly. The time delay meant exchange rates had changed before the trade was executed, significantly reducing her profit.
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European Securities and Markets Authority Publishes Supervisory Briefing on MiFID II Appropriateness Rules
04/04/2019
The European Securities and Markets Authority has published an updated version of its supervisory briefing on appropriateness. The original appropriateness briefing was published in December 2012 to provide guidance to EU national regulators on the appropriateness requirements under the original Markets in Financial Instruments Directive. The updated appropriateness briefing reflects the amended requirements introduced by the revised Directive or MiFID II and takes into account the new version of ESMA's suitability guidelines published in May 2018 to the extent they are relevant to the appropriateness rules.
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UK Financial Conduct Authority Implements Permanent Ban of Sale of Binary Options to Retail Consumers
03/29/2019
Following its recent consultation, the U.K. Financial Conduct Authority has published a Policy Statement, final rules and a Statement on the new product intervention measure it is introducing for retail binary options. Both contracts for difference and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by certain providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000 allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The FCA also consulted on product intervention rules for CfDs and those final rules are expected to be published in April this year.
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EU Contracts for Difference Product Intervention Measures to be Extended
03/27/2019
The European Securities and Markets Authority has announced that its restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from May 1, 2019, for a further three months. The extension will be on the same terms as the existing product intervention measure.
View ESMA's announcement.
View details of the existing decision. -
EU Product Intervention Measures for Binary Options Extended
03/27/2019
The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from April 2, 2019. This has now been published in the Official Journal of the European Union. ESMA announced in February this year that the existing restriction would be extended. The binary options Decision applies directly across the EU from April 2, 2019, for a period of three months.
View the decision.
View ESMA's notification. -
EU Statement on the Impact of a No-Deal Brexit on the Share Trading Obligation
03/19/2019
May 29, 2019 update: ESMA's guidance of March 19, 2019 has been superseded by revised guidance issued, details of which are available here.
The European Securities and Markets Authority has published a statement on the impact of a no-deal Brexit on the trading obligation for shares. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The requirement is not applicable to transactions in shares traded in the EU on a non-systematic, ad-hoc, irregular and infrequent basis. ESMA's statement is relevant should there be a no-deal Brexit (currently set for March 29, 2019) and there is no equivalence decision for the U.K.
Read more. -
UK Conduct Regulator Publishes Statement on Operating MiFID II Transparency Regime Post-Brexit
03/14/2019
The U.K. Financial Conduct Authority has published a Supervisory Statement on the operation of the transparency regime under the Markets in Financial Instruments Directive post-Brexit. The Statement sets out how the FCA will operate the pre- and post-trade transparency regime for the secondary markets in the event of a no-deal Brexit on March 29, 2019. The U.K.'s onshored MiFID II provides the FCA with transitional powers, for a period of four years, on how to run the transparency regime as the FCA does not yet have the technology to make the same calculations and assessments that ESMA carries out.
View the FCA's statement. -
UK Regulator Wants Stronger Wind-Down Plans for Loan-Based Crowdfunding Platforms
03/07/2019
The Financial Conduct Authority has published a "Dear CEO" letter addressed to loan-based peer-to-peer crowdfunding platforms requesting the platforms to review their wind-down arrangements. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.
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Further EU Clarification For Financial Services Firms in a No Deal Brexit
03/07/2019
The European Securities and Markets Authority has published a statement on its approach to certain provisions of the Markets in Financial Instruments package and the Benchmarks Regulation in the event of a no-deal Brexit.
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UK Financial Conduct Authority on Onshoring the EU Temporary Product Intervention Measures
02/22/2019
The U.K. Financial Conduct Authority has published a statement on onshoring of the European Securities and Markets Authority's temporary product intervention measures on retail contracts for difference and binary options products.
In June 2018, ESMA issued decision notices prohibiting the marketing, distribution or sale of binary options to retail clients and restricting the marketing, distribution or sale of CFDs to retail clients. These decisions have been renewed by ESMA and are currently due to expire on April 1, 2019 for binary options and April 30, 2019 for CFDs. Under the European Union (Withdrawal) Act 2018, the decisions will become part of U.K. domestic law on March 29, 2019, if the U.K. leaves the EU on that date without a ratified Withdrawal Agreement.
Read more. -
EU Product Intervention Measures for Binary Options to be Further Extended
02/18/2019
The European Securities and Markets Authority has announced that its prohibition on the marketing, distribution or sale of binary options to retail clients will be extended for a further three months from April 2, 2019. ESMA's ban has been in effect since July 2, 2018.
View ESMA's announcement.
View details of the existing product intervention measure for binary options. -
EU Contracts for Difference Product Intervention Measures Extended Again
01/31/2019
The European Securities and Markets Authority Decision renewing the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients has been published in the Official Journal of the European Union. ESMA announced on December 19, 2018, that the existing restriction would be extended. The CfD Decision applies directly across the EU from February 1, 2019, for a period of three months.
View the decision.
View ESMA's announcement. -
UK Conduct Regulator Consults on Guidance on Crypto-Assets and the UK Regulatory Perimeter
01/23/2019
The U.K. Financial Conduct Authority has launched a consultation on proposed Guidance on whether certain crypto-assets fall within the U.K.'s regulatory perimeter (CP19/3). The FCA's consultation is in response to one of the commitments made by the U.K. Cryptoasset Taskforce last year in its final Cryptoassets Report. The Taskforce was established in March 2018 and comprises representatives from HM Treasury, the FCA and the Bank of England. The FCA's consultation closes on April 5, 2019. The FCA intends to publish the final Guidance on the existing regulatory perimeter in relation to crypto-assets by summer 2019.
The FCA's proposed Guidance is intended to help firms determine whether certain crypto-assets fall within the FCA's regulatory perimeter. However, the FCA notes that assessing whether a crypto-asset is within the perimeter can only be done on a case-by-case basis and that the responsibility for ensuring that it has the correct permissions lies with the firm undertaking the activity. A firm that undertakes a regulated activity without the requisite permissions will be in breach of the 'general prohibition' in the Financial Services and Markets Act 2000. Any such breach by a person is a criminal offence and the person may be imprisoned or fined, or both. The consultation is relevant to a wide range of consumers, stakeholders and firms, in particular firms that issue or create crypto-assets, firms that market, sell, buy, hold or store crypto-assets, financial advisors, investment managers and investment exchanges.
Read more. -
European Securities and Markets Authority Publishes Recommendations on Crypto-Assets and Initial Coin Offerings
01/09/2019
The European Securities and Markets Authority has published a report on the application and suitability of the EU securities regulatory framework to crypto-assets, including Initial Coin Offerings. The report is in response to the European Commission's request in its FinTech Action Plan 2018. Like the European Banking Authority, which published a report on the same day in relation to banking sector issues, ESMA found that EU activities related to crypto-assets are fairly low and do not present any financial stability risks.
ESMA's report focuses on the legal qualification of crypto-assets under EU financial securities laws and highlights that this may differ across EU member states because it will be subject to the national laws implementing EU legislation. ESMA notes that there is currently no legal definition of crypto-assets and that a key consideration is whether a crypto-asset qualifies as a financial instrument under the revised Markets in Financial Instruments package. Where a crypto-asset qualifies as a MiFID financial instrument, the full requirements under various securities legislation may apply, subject to any applicable exemptions. According to ESMA, the rules in the Prospectus Directive would apply to an issue of crypto-assets offered to the public, including through an ICO, where the instruments are transferable securities.
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UK Conduct Regulator Warns Firms About Misleading Financial Promotions
01/09/2019
The Financial Conduct Authority has published a "Dear CEO" letter addressed to the Chief Executive Officers of all FCA-regulated firms. In the letter, the FCA highlights its concerns over the practice engaged in by some firms of issuing financial promotions which suggest or imply that all of the activities or investments undertaken by the firm are regulated by the FCA and/or Prudential Regulation Authority, when they are not.
Some regulated firms undertake both regulated and unregulated business. The FCA has identified that some of these firms are issuing financial promotions which do not make clear which aspects of its business are not regulated by the FCA and/or PRA. This breaches the requirement that all financial promotions are fair, clear and not misleading and that a firm cannot indicate or imply that it is regulated or otherwise supervised by the FCA for its unregulated business. The FCA encourages all firms to reflect on the letter and ensure that their actions comply with the FCA's rules relating to financial promotions.
View the letter. -
EU Product Intervention Measure Banning the Sale of Binary Options is Extended
12/27/2018
The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. This has been published in the Official Journal of the European Union. ESMA announced in November 2018 that the existing restriction would be extended. The binary options Decision applies directly across the EU from January 2, 2019 for a period of three months.
View the Decision.
View ESMA's notification. -
EU Guidelines on Commodity Derivatives Definition Published
12/21/2018
The European Securities and Markets Authority has published amended Guidelines on definitions of commodity derivatives and their classification. The amended Guidelines, which are an update to the guidelines originally adopted under the previous Markets in Financial Instruments Directive (MiFID I), have been adapted to the new MiFID II regulatory framework without amending their substance.
Read more.Topic : MiFID II -
EU Grants Temporary Equivalence for Swiss Exchanges for Purpose of Share Trading Obligation
12/20/2018
The EU has granted temporary equivalence to two Swiss stock exchanges (SIX Swiss Exchange AG and BX Swiss AG) under the Markets in Financial Instruments Regulation. MiFIR requires EU investment firms to ensure that the trades they undertake in shares admitted to trading on a regulated market or traded on a trading venue take place on a regulated market, multilateral trading facility, systematic internaliser or equivalent third-country trading venue. EU investment firms will be able to comply with the MiFIR share trading obligation by trading shares on these Swiss exchanges from January 1, 2019 to June 30, 2019. The extension of the equivalence appears to be dependent on the progress of trade discussions between the EU and Switzerland.
View the EU equivalence decision for Swiss exchanges.Topic : MiFID II -
EU Contracts for Difference Product Intervention Measures to be Extended Again
12/19/2018
The European Securities and Markets Authority has published a statement announcing that its various restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from February 1, 2019, for a further three months. ESMA has powers under the Markets in Financial Instruments Regulation to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the European Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire, and it would then fall to member states to impose similar restrictions at a national level, if they so wish.
ESMA considers that a significant investor protection concern in relation to retail clients still exists. Its statement confirms that the existing restriction, implemented on November 1, 2018, will be extended from February 1, 2019 for a further three months.
View ESMA's statement.
View details of the existing CfD restrictions. -
European Commission Adopts Legislation to Promote Small and Mid-sized Enterprises Growth Markets
12/13/2018
Following its consultation earlier this year on a proposed regulation, the European Commission has adopted a Delegated Regulation regarding certain registration conditions to promote the use of SME Growth Markets for the purposes of the revised Markets in Financial Instruments package, known as MiFID II. SME Growth Markets are a new sub-category of multilateral trading facility introduced by MiFID II in January 2018 to facilitate access to capital for SMEs. The adopted Delegated Regulation will amend existing delegated legislation under MiFID II to address regulatory barriers to the take-up of SME Growth Markets.
Read more. -
European Commission Adopts Amendments to Technical Standards On Systematic Internalisers' Quote Rules
12/12/2018
The European Commission has adopted a Delegated Regulation amending and correcting the Regulatory Technical Standards under the Markets in Financial Instruments Regulation on the equity transparency obligations of trading venues and investment firms. The RTS, known as RTS 1, is set out in Commission Delegated Regulation (EU) 2017/587, supplementing MiFIR. Under MiFIR, Systematic Internalisers must make public firm quotes in equity instruments. The quotes must: (i) be at least equivalent to 10% of the standard market size for the quoted instrument; (ii) include both a bid and an offer price for a size that could be up to market size; and (iii) reflect the prevailing market conditions for that instrument. RTS 1 specifies the concept of "prices reflecting prevailing market conditions" as being "close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity."
Read more.Topic : MiFID II -
UK Conduct Authority Consults on Permanent Product Intervention Measures
12/07/2018
The U.K. Financial Conduct Authority has launched two consultations proposing to prohibit the sale, marketing and distribution of binary options to retail consumers and to restrict the sale, marketing and distribution of contracts for difference and similar products to retail customers. Both CFDs and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000, allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The proposed rules would be permanent and would replace the temporary measures introduced, and subsequently renewed, by the European Securities and Markets Authority earlier this year.
Read more. -
UK Conduct Regulator Publishes Second Consultation on Brexit-Related Changes to Its Rulebook and Binding Technical Standards
11/26/2018
The U.K. Financial Conduct Authority has published a second consultation on proposed changes to the FCA Handbook and guidance to ensure a functioning legal and regulatory framework for financial services in the event of a "no-deal" scenario whereby the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement in place and there is consequently no transitional period for firms. The proposed amendments will not take effect on exit day if the U.K. enters into a transitional period.
The consultation includes the FCA's further proposals in relation to those Binding Technical Standards that it has been empowered by HM Treasury to amend prior to Brexit and to maintain afterwards. Since the FCA's first consultation on Brexit-related Handbook changes in October 2018, HM Treasury has published further policy notes and/or financial services "onshoring" statutory instruments with proposed amendments to retained EU law. Many of the FCA's proposals on the BTS are consequential in nature and follow the amendments proposed in the statutory instruments.
Read more. -
EU Supervisory Authority Issues Updated Supervisory Briefing on MiFID II Suitability
11/13/2018
The European Securities and Markets Authority has published an updated version of its supervisory briefing on suitability. The original suitability briefing was published in December 2012 to provide guidance to EU national regulators on the suitability requirements under the original Markets in Financial Instruments Directive. The updated suitability briefing reflects the amended requirements introduced by the revised Markets in Financial Instruments Directive and takes into account the new version of ESMA's Suitability Guidelines that was published in May 2018.
While the updated briefing is primarily aimed at national regulators, it should also assist market participants by providing indications of compliant implementation of the MiFID II suitability provisions.
Read more.Topic : MiFID II -
EU Supervisory Authority Issues Call for Evidence on Periodic Auctions for Equity Instruments
11/09/2018
The European Securities and Markets Authority has published a call for evidence on periodic auctions for equity instruments. ESMA wishes to gather more information on the functioning of so-called frequent batch auction trading systems. Frequent batch auctions for equities have rapidly gained market share since the introduction of the Double Volume Cap mechanism under the revised Markets in Financial Instruments package. This has given rise to concerns that this trading may be used as alternative to trading under the DVC waivers and/or as a way to avoid the pre-trade transparency requirements of systematic internalisers. ESMA has conducted a stock-take, assessing seven frequent batch auction systems operating in the EU and sets out its findings in the call for evidence.
In the call for evidence, ESMA distinguishes conventional periodic auctions from frequent batch auctions and outlines the key characteristics of frequent batch auction systems operating in the EU. ESMA sets out its observation of a rising market share for equity trading on frequent batch auctions and considers developments in equity trading since the application of MiFID II. It seeks input on a range of questions focused on these issues.
Responses to the call for evidence are invited by January 11, 2019. The call for evidence will be of particular interest to trading venues and investment firms trading in equity instruments, but ESMA also welcomes responses from any other market participants including trade associations and industry bodies, institutional and retail investors.
ESMA will use the feedback to the call for evidence to assess whether and to what extent frequent batch auction systems can be used to circumvent the MiFID II transparency requirements and will develop appropriate policy measures if necessary.
View the call for evidence.Topic : MiFID II -
EU Supervisory Authority Will Extend Binary Options Ban Into 2019
11/09/2018
The European Securities and Markets Authority has announced that it proposes to renew the prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU. ESMA is renewing the prohibition on binary options because it considers that a significant investor protection concern remains. The measure will be renewed on the same terms as the previous renewal decision that has applied from October 2, 2018 and that will expire on January 1, 2019.
ESMA's Board of Supervisors agreed on the renewal of intervention measures on November 7, 2018. ESMA will publish an official notice on its website in the coming weeks. The new Decision will then be published in the Official Journal of the European Union and will start to apply from January 2, 2019 for a period of three months.
View ESMA's announcement.
View details of the prohibition expiring on January 1, 2019. -
EU National Regulators To Confirm If They Intend to Comply With MiFID II Suitability Guidelines
11/06/2018
The European Securities and Markets Authority has published on its website the official translations of its revised Guidelines on aspects of the suitability requirements under the revised Markets in Financial Instruments Directive.
ESMA published the finalized Guidelines in May 2018, following a consultation between July and December 2017. The finalized Guidelines largely confirm ESMA's previous 2012 Guidelines on MiFID I, but have a broader scope and ESMA has added clarifications and refinements where necessary.
Now that the Guidelines have been translated into the official EU languages and published on ESMA's website, national regulators will have a two-month period (expiring on January 6, 2019) in which to notify ESMA whether they comply or intend to comply with the guidelines. National regulators should state their reasons for non-compliance where they do not comply or do not intend to comply.
Read more.Topic : MiFID II -
EU Authority Calls for Non-Enforcement of Impending Clearing Obligation for Intragroup Transactions and Non-Financial Counterparties
10/31/2018
The European Securities and Markets Authority has issued a statement on the impending clearing obligation under the European Market Infrastructure Regulation. The statement is also relevant to the trading obligation under the Markets in Financial Instruments Regulation which is triggered by the EMIR clearing obligation.
EMIR provides an exemption from the clearing obligation for intragroup transactions with a third-country group entity where one of the counterparties is a third-country group entity and there is an equivalence decision in respect of the third country in which it is situated. An equivalence decision would enable parties that are subject to both the EU and a third country's clearing obligation to comply only with one jurisdiction's requirements, but no equivalence decisions have been made to date for these purposes.
Read more. -
EU Contracts for Differences Product Intervention Measures Extended
10/31/2018
The European Securities and Markets Authority Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for differences to retail clients has been published in the Official Journal of the European Union. ESMA announced on September 28, 2018 that the existing restriction would be extended and would include an additional reduced character risk warning because CFD providers have experienced technical difficulties in using the risk warnings due to the character limitations imposed by third-party marketing providers. The CFD Decision applies directly across the EU from November 1, 2018 for three months.
ESMA extended the temporary product intervention prohibiting the marketing, distribution and sale of binary options to retail investors for a further three months from October 2, 2018, although certain types of binary options were excluded from the scope of the prohibition because ESMA considers that those binary options are less likely to present a significant investor protection concern. Both of ESMA's product intervention measures are made using powers under the Markets in Financial Instruments Regulation.
View the Decision.
View details of the extension of the ban relating to binary options. -
Draft UK Post-Brexit Legislation to Onshore the EU Markets in Financial Instruments Package
10/11/2018
HM Treasury has published a draft of the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, along with explanatory information. The draft Regulations are primarily relevant for MiFID II-authorized firms including investment banks, stock and futures exchanges, broker-dealers, investment advisers and investment managers.
The draft Regulations have been prepared in preparation for a "no-deal" scenario, in which the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement. The no-deal scenario would mean that there would be no transitional period following Brexit and that the U.K. would be treated as a third-country after exit day. The changes set out in the draft Regulations will not take effect if the U.K. enters a transition period.
Read more. -
European Supervisory Authority Issues Opinion on Position Limits for UK Natural Gas Derivatives
10/05/2018
The European Securities and Markets Authority has published an Opinion (dated September 24, 2018) on position limits for U.K. Natural Gas Contracts, for the purposes of the position limit regime established by the revised Markets in Financial Instruments Directive. MiFID II and its secondary legislation establish the position limits regime for commodity derivatives. For illiquid contracts, the position limits are set in the legislation. However, where contracts are liquid, position limits are set by the relevant national regulator and notified to ESMA. Secondary legislation under MiFID II sets out Regulatory Technical Standards for the methodology national regulators should use and the factors they should consider when setting position limits.
The U.K. Financial Conduct Authority notified ESMA in February 2018 of the position limits the FCA intends to set for U.K. Natural Gas commodity futures and options contracts. In its Opinion, ESMA confirms that the spot month position limit and the other months' position limit are consistent with the objectives of MiFID II and compliant with the methodology established by the relevant RTS.
Read more. -
European Supervisory Authority Withdraws Guidelines for Algorithmic Trading Controls
10/03/2018
The European Securities and Markets Authority has published a decision (dated September 26, 2018) of its Board of Supervisors to withdraw its existing Guidelines for trading platforms, investment firms and national regulators on systems and controls in an automated trading environment.
The Guidelines were published by ESMA in 2011 to provide important clarifications to ensure a common, uniform and consistent application of the original Markets in Financial Instruments Directive and its secondary legislation (MiFID I). The content of the Guidelines has now been incorporated within, and consequently superseded by, detailed provisions in the revised Markets in Financial Instruments Directive and its secondary legislation (MiFID II) and the Market Abuse Regulation.
The Guidelines have been withdrawn effective from September 26, 2018.
View the ESMA decision.Topic : MiFID II -
EU Opinion Attempts to Clarify the Market Size Calculation for Ancillary Activity Exemption under MiFID II
10/02/2018
The European Securities and Markets Authority has issued an opinion addressed to EU national regulators on the market size calculation for the ancillary activity exemption under the revised Markets in Financial Instruments Directive.
MiFID II provides an exemption from the requirement for authorization as an investment firm when dealing on own account, or providing investment services to clients in commodity derivatives, emission allowances or derivatives thereof, provided that the activity is an ancillary activity to their main business at group level and the main business is not the provision of investment services within the meaning of MiFID II or banking activities under the Capital Requirements Directive. Delegated Regulation (EU 2017/592) sets out the criteria for establishing when an activity should be considered as ancillary to the main business at group level, including the rules for calculating the overall market trading activity of a firm.
ESMA's opinion provides guidance to market participants and national regulators on determining market size figures, since there is no centralized, publicly available record of transactions for commodity derivatives and emission allowances. ESMA acknowledges that the data it has used for the guidance may have limitations in terms of accuracy and completeness and states that national regulators may use alternative data provided by market participants for the calculation.
View the opinion.Topic : MiFID II -
European Securities and Markets Authority Recommends Tightening of Third-Country Requirements
10/01/2018
The European Securities and Markets Authority has published a letter (dated September 26, 2018) from ESMA Chair Steven Maijoor addressed to Valdis Dombrovskis, the Vice President of the European Commission. The purpose of the letter is to contribute to any further work the Commission may undertake on the investor protection and intermediaries-related requirements under the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation.
Read more. -
EU Ban Relating to Binary Options Extended
10/01/2018
Following its announcement in August 2018, the European Securities and Markets Authority has published notice of the extension of the prohibition on the marketing, distribution and sale of binary options to retail investors for a further three-month period from October 2, 2018. ESMA is extending the ban because the threat to investor protection has not been addressed yet through a change in EU legislation and national regulators have either taken no action or have taken insufficient action to address the potential harm.
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European Securities and Markets Authority Publishes Its 2019 Priorities
10/01/2018
The European Securities and Markets Authority has published its Annual Work Programme for 2019, dated September 26, 2018. ESMA sets out its focus areas for 2019 and provides details of expected outputs within each of the areas. ESMA also indicates that a number of pieces of EU legislation may be reviewed. These include the Market Abuse Regulation and the clearing obligation under the European Market Infrastructure Regulation, in addition to the reviews that have already been announced.
Read more. -
EU Contracts for Difference Product Intervention Measures to be Extended
09/28/2018
The European Securities and Markets Authority has announced that its various restrictions on the sale, distribution and marketing of Contracts for Difference to retail investors will be extended from November 1, 2018 for a further three months.
ESMA adopted two temporary product intervention Decisions under the Markets in Financial Instruments Regulation in June this year, one relating to binary options and another to CFDs. ESMA has powers under MiFIR to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire and it would then fall to member states to impose similar restrictions at a national level, if they so wish. The U.K. Financial Conduct Authority is expected to consult before the end of the year on whether to make permanent the EU's temporary prohibition on marketing, distribution and sale of binary options to retail investors. The International Organization of Securities Commissions recently published a report on retail OTC leveraged products, alongside a statement warning retail investors of the risks of investing in illegal or fraudulent binary options.
Read more. -
New Data Completeness Indicators to be Published for EU Trading Venues
09/27/2018
The European Securities and Markets Authority has announced that it will publish two new data completeness indicators for trading venues, detailing how venues are performing on the delivery of Double Volume Cap and bond liquidity data in compliance with their obligations under the Markets in Financial Instruments Regulation. ESMA has been working with national regulators to improve the timeliness and completeness of the data underpinning the monthly DVC and quarterly bond liquidity assessment publications. ESMA believes that the new indicators will incentivize trading venues to provide timely and complete data. For both DVC and bond liquidity data, ESMA will introduce the following completeness indicators:
- The Completeness Ratio, to provide information on the completeness of each particular venue, irrespective of the performance of other venues.
- The Completeness Shortfall, which will give an indication of a venue’s performance in terms of completeness compared to other trading venues and reflect the percentage of missing data for which a particular venue is responsible.
View the ESMA press release.Topic : MiFID II -
Further Amendments to Technical Standards on EU Systematic Internalisers' Quote Rules
09/20/2018
The European Securities and Markets Authority has published an Opinion and revised draft amendments to the Regulatory Technical Standard on the equity transparency obligations of trading venues and investment firms. The RTS, known as RTS 1, is set out in Commission Delegated Regulation (EU) 2017/587, supplementing the Markets in Financial Instruments Regulation.
Read more.Topic : MiFID II -
European Supervisory Authorities Report on Automation in Financial Advice
09/05/2018
The Joint Committee of the European Supervisory Authorities has published a joint report on automation in financial advice. The Report follows the ESA's 2015 joint discussion paper and follow-up report in 2016. The Report provides a summary of recent sectoral work by the ESAs in this area and the main findings of a survey with national regulators on the evolution of automation in financial advice in the securities, banking and insurance sectors. The ESAs observed that automated services are more often offered through partnerships between established financial intermediaries and FinTech firms than by FinTech firms alone. The ESAs also found that automation in financial advice has grown slowly and that the number of firms and customers involved is still limited. As a result, the ESAs do not consider that any of the previously identified risks have materialized and therefore that further action is unnecessary at this stage. The ESAs will conduct a new monitoring exercise if and when market developments and risks merit the work.
View the report. -
European Commission Communication on Proposed Amendments to Technical Standards on Systematic Internalisers' Quote Rules
09/03/2018
The European Commission has published a Communication (dated August 10, 2018) on proposed amendments by the European Securities and Markets Authority to a Regulatory Technical Standard, known as "RTS1," supplementing the Markets in Financial Instruments Regulation.
Under MiFIR, Systematic Internalisers must make public firm quotes in equity instruments. The quotes must: (i) be at least equivalent of 10% of the standard market size for the quoted instrument; (ii) include both a bid and offer price; and (iii) reflect the prevailing market conditions for that instrument. RTS 1 specifies the concept of "prices reflecting prevailing market conditions" as being "close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity." ESMA submitted final draft amendments to RTS 1 in March 2018, which provided that, where a financial instrument is subject to the "minimum tick size" regime, the quotes of an SI can only adequately reflect prevailing market conditions when those quotes reflect the minimum price increments ("tick sizes") quoted by EU trading venues trading the instrument.
Read more.Topic : MiFID II -
European Securities and Markets Authority Intends to Extend Product Intervention Measures for Binary Options for a Further Three Months
08/24/2018
The European Securities and Markets Authority has announced its intention to adopt a Decision to extend the prohibition on the marketing, distribution and sale of binary options to retail investors for a further three-month period from October 2, 2018. ESMA has previously adopted intervention measures for binary options, with the current Decision set to expire on October 1, 2018.
ESMA has power under the Markets in Financial Instruments Regulation to impose prohibitions or restrictions on certain financial instruments, financial activities or practices. This may be done when, among other conditions, the exercise of ESMA's power addresses a significant investor protection concern in the Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire. In reviewing the current Decision, ESMA has agreed to exclude from the scope of product intervention certain types of binary option that are less likely to lead to a significant investor protection concern.
Read more. -
EU and UK Authorities Clarify Trading Obligation Expectations for Pension Schemes
08/08/2018
The European Securities and Markets Authority has published a further statement on the transitional exemption from the clearing obligation for pension scheme arrangements under the European Market Infrastructure Regulation and delegated regulations. Transitional provisions provide for PSAs to be exempt from the clearing obligation until August 16, 2018. There is no provision in EMIR that would allow for a further extension of this exemption period. It is proposed that this exemption will be further extended under the proposal to amend EMIR, known as EMIR Refit. ESMA issued a statement on July 3, 2018 stating that national regulators are expected not to prioritize "their supervisory actions towards entities that are expected to be exempted again in a relatively short period of time and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in a proportionate manner."
This new statement clarifies that ESMA does not expect national regulators to focus on any non-compliance by PSAs with the related trading obligation under the Markets in Financial Instruments Regulation. Financial counterparties that are exempt from the clearing obligation under EMIR are also exempt from the trading obligation under MiFIR. It is likely that the clearing obligation exemption will expire before it is extended under EMIR Refit and therefore the trading obligation exemption would also lapse.
Read more. -
UK Conduct Regulator Reminds Firms of Obligations on Selling High-Risk Products to Retail Clients
08/01/2018
The U.K. Financial Conduct Authority has issued a statement on selling high-risk speculative investments to retail clients following the European Securities and Markets Authority's product intervention on contracts for difference products.
ESMA issued decisions in March and June 2018 to temporarily prohibit the marketing, distribution or sale of binary options and to impose restrictions on the marketing, distribution or sale of CFDs to retail clients. In the CFD decision, ESMA had clarified that turbo certificates were outside the scope of the CFD restrictions. However, in its recently updated Q&A on its product intervention, ESMA acknowledges that turbo certificates have comparable features to CFDs, such as leverage.
Read more. -
Global Recommendations for Trading Venues to Manage Extreme Volatility
08/01/2018
The International Organization of Securities Commissions has published a report on mechanisms used by trading venues to manage extreme volatility and preserve orderly trading. Following its consultation earlier this year, IOSCO is making eight recommendations for trading venues and their regulators to consider when implementing, operating and monitoring volatility control mechanisms to preserve orderly trading.
Read more. -
UK Financial Conduct Authority Proposes Changes to Rules Governing Peer-to-Peer Lending Platforms
07/27/2018
The Financial Conduct Authority has launched a consultation on new rules for loan-based crowdfunding platforms, also known as peer-to-peer lending platforms. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.
The FCA began a post-implementation review of the crowdfunding sector and the applicable regimes in 2016. In the post-implementation review, the FCA identified that harm may be caused to investors as a result of poor business practices and due to the business models that some platforms have adopted. The consultation paper summarizes the FCA's findings from that review and sets out the FCA's proposals to change certain rules and guidance.
Read more. -
UK Conduct Regulator Publishes Interim Report on Investment Platforms Market Study
07/16/2018
The U.K. Financial Conduct Authority has published an Interim report as part of its market study to ascertain whether competition between investment platforms is working in the interests of consumers. The FCA launched the investment platforms market study in July 2017 after potential competition issues in the sector were highlighted in the course of its asset management market study, on which it issued its final report in June 2017.
The FCA has been assessing competition in the sector by exploring a range of areas, namely: barriers to entry and expansion; business models; platform profitability; the impact of financial advisers; and consumer preferences and behaviour. Noting the increasing vertical integration in the sector, the FCA has also been examining commercial relationships between platforms, asset managers, discretionary investment managers and financial advisers.
The FCA has found that the market appears largely to be working well for both advised and non-advised consumers and that customer satisfaction is currently high. However, the FCA has found that there are some customers for whom the market is not working as well as it should. The interim report highlights the issues the FCA has identified and consults on proposed remedies. The report is supported by eight annexes covering elements of the FCA's research and findings so far.
Read more. -
EU Proposals to Amend MiFID II's Tick Size Regime
07/13/2018
The European Securities and Markets Authority has launched a consultation on proposed amendments to the Regulatory Technical Standards (Commission Delegated Regulation (EU) 2017/588, also known as RTS 11) providing for the tick size regime under the Markets in Financial Instruments package, known as MiFID II. The tick size regime subjects orders in shares and depositary receipts to minimum tick sizes that are determined according to both the: (i) average daily number of transactions on the most relevant market in terms of liquidity; and (ii) price of the order. RTS 11 calibrates the minimum tick size based on the most liquid market in the EU, without any consideration being given to the liquidity on non-EU trading venues. The result is that EU trading venues have experienced a drop in market share in third-country financial instruments since January 3, 2018 when MiFID II came into effect. The trading venues have highlighted that the decrease in market share is because the RTS 11 methodology requires them to have in place larger price increments than those of their third-country competitor trading venues.
Read more.Topic : MiFID II -
FICC Markets Standards Board Consults on Statement of Good Practice on Algorithmic Trading
07/11/2018
The FICC Markets Standards Board has launched a consultation on a transparency draft of a Statement of Good Practice on algorithmic trading in the wholesale fixed income, commodity and currency markets. The draft SGP forms part of the FMSB's work to build up a body of Standards and Statements of Good Practice to improve conduct and raise standards in the wholesale FICC markets. The FMSB Standards and SGPs do not impose legal or regulatory obligations on FMSB members, nor do they take the place of regulation. Instead, an SGP is intended to be considered to the extent it is possible to follow it in compliance with applicable laws.
For the purposes of the consultation paper, "algorithmic trading" is defined as trading in instruments where a computer algorithm, with limited or no human intervention, automatically determines individual parameters of orders, such as whether to initiate the order, the timing, price or quantity of the order or how to manage the order after its submission.
Read more. -
UK Regulations Implementing Parts of the Prospectus Regulation Published
06/29/2018
The Financial Services and Markets Act 2000 (Prospectus and Markets in Financial Instruments) Regulations 2018, dated June 27, 2018, have been laid before Parliament. The U.K. Regulations will come into force on July 21, 2018, implementing parts of the Prospectus Regulation that will apply from that date. The Prospectus Regulation will replace the existing Prospectus Directive and sets out the requirements for a prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. The Prospectus Regulation aims to simplify the rules and administrative obligations for companies wishing to issue shares or debt on the market and reducing the costs of preparing a prospectus, thus fostering cross-border investments in the single market, while at the same time still enabling investors to make informed investment decisions. The remainder of its provisions take effect on July 21, 2019.
U.K. law is not needed to transpose the Prospectus Regulation, which will be directly applicable across the EU. However, certain U.K. legislation will need to be amended to ensure that there is no conflict of laws. The U.K. Regulations amend the Financial Services and Markets Act by increasing the threshold, from €5 million to €8 million, for which a prospectus is required for an offer of securities to the public within the U.K. The U.K. Regulations also amend the U.K. legislation that implemented the Markets in Financial Instruments Directive, including by correcting the definition of a MiFID investment firm.
View the U.K. Regulations (S.I. 2018/786).
View the explanatory memorandum. -
European Banking Authority Proposes Updated Guidelines on Outsourcing by Financial Institutions
06/22/2018
The European Banking Authority has launched a consultation on draft Guidelines on outsourcing arrangements. The proposed Guidelines are intended to update and replace the outsourcing guidelines issued in 2006 (by the EBA's predecessor, the Committee of European Banking Supervisors) that applied to outsourcing by credit institutions. The proposed Guidelines will have a wider scope, applying to all financial institutions that are within the scope of the EBA's mandate, namely credit institutions and investment firms subject to the Capital Requirements Directive, payment institutions and electronic money institutions. The proposed Guidelines also integrate the recommendation on outsourcing to cloud service providers that was published by the EBA in December 2017.
The proposed Guidelines set out a definition of outsourcing in line with delegated legislation under the revised Markets in Financial Instruments Directive. They cover: (i) proportionality and group application; (ii) the nature of outsourcing arrangements; (iii) the applicable governance framework; (iv) the outsourcing process; and (v) guidelines on outsourcing addressed to competent authorities. A separate Annex provides an illustrative template that could be used for complying with the requirement in the proposed Guidelines to maintain a register of all outsourcing arrangements at institution and group level where applicable.
Read more. -
European Commission Clarifies Ancillary Activity Exemption Under MiFID II
06/22/2018
The European Commission has published a letter, dated May 31, 2018, from the President of the European Commission, Valdis Dombrovskis, to Steven Maijoor, Chair of the European Securities and Markets Authority, following ESMA's request in April for clarification on how to interpret the ancillary activity exemption under the revised Markets in Financial Instruments Directive.
MiFID II exempts non-financial entities that deal on own account, or provide investment services to clients, in commodity derivatives from having to obtain authorization as an investment firm under MiFID II provided that, among other things, this activity is ancillary to their main business. The wording of both MiFID II and related Regulatory Technical Standards suggests that the tests for whether an activity is ancillary to the main business should be carried out at the level of the entity's group. However, ESMA stated in its letter to the Commission that some drafting amendments that were introduced by the Commission have led to uncertainty as to whether the tests should be carried out at the level of the entity rather than at group level.
The Commission has confirmed that MiFID II requires that the ancillary activities test needs to be calculated by each entity within a group that engages in either of the two relevant MiFID activities for which the exemption is available. In consequence, the ancillary activities test must be calculated as many times as necessary for each separate entity which trades in commodity derivatives within a group.
View the letter to ESMA.
View ESMA's request for clarification.Topic : MiFID II -
European Securities and Markets Authority and UK Financial Conduct Authority End Concessionary Period for Legal Entity Identifier Requirements
06/20/2018
The European Securities and Markets Authority has published a statement on the requirements under the Markets in Financial Instruments Regulation for a Legal Entity Identifier. In response to concerns that institutions would not all be able to obtain LEI codes in time for MiFIR's effective date, January 3, 2018, ESMA had issued a statement in December 2017 providing temporary concessions for a period of six months. Those temporary concessions permitted investment firms to provide a service triggering the obligation to submit a transaction report to a client from which they had not obtained an LEI code, provided that, before providing the service, they obtain the necessary documentation from the client to apply for an LEI code on the client's behalf. Trading venues were also permitted to report their own LEI codes instead of LEI codes of non-EU issuers while reaching out to those non-EU issuers.
Read more.Topic : MiFID II -
UK Prudential Regulator Confirms Algorithmic Trading Expectations
06/15/2018
Following its consultation in February 2018, the Prudential Regulation Authority has published a Policy Statement and final new Supervisory Statement on Algorithmic Trading. The Supervisory Statement sets out the PRA's supervisory expectations of firms in relation to their algorithmic trading activities and covers: (i) governance; (ii) a firm's algorithmic approval process; (iii) testing and deployment; (iv) inventories and documentation; and (v) risk management and other systems and controls functions.
The Supervisory Statement applies to firms that engage in algorithmic trading and that are subject to the PRA's rules on algorithmic trading as well as the Regulatory Technical Standards on the organizational requirements of investment firms engaged in algorithmic trading (Commission Delegated Regulation (EU) 2017/589) under the Markets in Financial Instruments package. The Supervisory Statement applies to all of a firm's algorithmic trading activities, including those related to unregulated financial instruments.
Read more.Topic : MiFID II -
European Securities and Markets Authority Adopts First Product Intervention Measures for Contracts for Difference and Binary Options
06/01/2018
The European Securities and Markets Authority has adopted two Decisions on the provision of Contracts for Difference and binary options to retail investors. The effect of the Decisions is to prohibit the marketing, distribution and sale of binary options to retail investors and to impose a number of restrictions on the marketing, distribution and sale of Contracts for Difference to retail investors. Both CFDs and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by providers and distributors of the products.
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EU Authorities Highlight Importance of Bail-In Risk Disclosures for Retail Investors in Bank Debt Liabilities
05/30/2018
The European Banking Authority and the European Securities and Markets Authority have published a joint statement on the treatment of retail holdings of debt financial instruments under the EU Bank Recovery and Resolution Directive and the revised Markets in Financial Instruments Directive. The EBA and ESMA highlight that care is needed when bail-in is implemented in relation to debt liabilities held by retail customers. There have been a number of mis-selling cases as a result of firms not complying with the investor protection requirements at the point of sale of banks' debt liabilities to retail investors.
The EBA and ESMA emphasize that to ensure that debt instruments are distributed to clients for whom they are suitable, firms must properly implement the MiFID II investor protection requirements. Those requirements oblige firms to, among other things, act honestly, fairly, professionally and in the best interests of clients, disclose certain information to potential and existing clients and conduct suitability assessments. In addition, the product governance framework requires manufacturers and distributors of financial products to act in the client's best interests at all stages of the life-cycle of products or services. In particular, firms must identify the target market for complex products to a greater level of detail than other products. Instruments subject to bail-in must be classified as complex products.
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European Securities and Markets Authority Issues Final Guidelines on MiFID II Suitability
05/28/2018
The European Securities and Markets Authority has published a Final Report setting out finalized Guidelines on aspects of the suitability requirements under the revised Markets in Financial Instruments Directive. ESMA consulted previously on a draft version of the Guidelines between July and October 2017.
The finalized Guidelines largely confirm ESMA's previous 2012 guidelines on MiFID I, but have a broader scope and ESMA has added clarifications and refinements where necessary.
Read more.Topic : MiFID II -
European Commission Proposes Legislation to Promote SME Growth Markets
05/24/2018
The European Commission has published a proposal for a Regulation to amend the Market Abuse Regulation and the new Prospectus Regulation. The aim of the proposed Regulation is to promote the use of SME Growth Markets by making technical adjustments to the MAR and the new PR to make the regulatory framework applying to listed Small and Medium-sized Enterprises more proportionate and to foster the liquidity of equity instruments listed on SME Growth Markets, while maintaining a high level of investor protection and market integrity. The proposed Regulation is in line with the objectives of the EU Capital Markets Union of reducing the overreliance on bank funding and diversifying market-based sources of financing for European companies.
SME Growth Markets are a new sub-category of multilateral trading facility introduced by the revised Markets in Financial Instruments Directive in January 2018. Companies listed on an SME Growth Market are required to comply with MAR and the PR and are impacted by some aspects of MiFID II. The adjustments in the proposal for a Regulation are designed to lower the administrative burden and costs for issuers on SME Growth Markets stemming from compliance with MAR and the PR and to address regulatory shortcomings in MAR that can affect the liquidity of SME financial instruments. The European Commission has also published a separate proposal for a regulation amending delegated legislation under MiFID II to address regulatory barriers to the take-up of the SME Growth Markets.
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European Commission Proposes MiFID II Amendments to Promote SME Growth Markets
05/24/2018
The European Commission has published for consultation a draft Delegated Regulation on registration conditions to promote the use of SME Growth Markets for the purposes of the revised Markets in Financial Instruments Directive. MiFID II introduced SME Growth Markets as a new sub-category of multilateral trading facility in January 2018 to facilitate access to capital for Small and Medium-sized Enterprises. The proposed delegated regulation will amend existing delegated legislation under MiFID II to address regulatory barriers to the take-up of SME Growth Markets. The European Commission has also published separately a legislative proposal to make adjustments to the Market Abuse Regulation and the Prospectus Regulation is to promote the use of SME Growth Markets.
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European Commission Proposes Legislative Package on Sustainable Finance
05/24/2018
The European Commission has published a package of legislative reforms on sustainable finance. The aim of the package of reforms, which form part of the Commission's broader Capital Markets Union initiative, is to ensure that environmental, social and governance considerations are consistently integrated into the investment and advisory process across sectors. The proposed measures comprise:
(i) a proposed Regulation on the establishment of a framework to facilitate sustainable investment. This will establish an EU-wide classification system for environmentally sustainable economic activities and ensure that investment strategies are oriented towards economic activities that genuinely contribute to achieving environmental objectives. The proposed Regulation will empower the European Commission to adopt delegated acts to specify technical screening criteria to assess the contribution of a given economic activity to a particular environmental objective as substantial. A list of six environmental objectives is set out in the proposed regulation, namely: climate change mitigation; climate change adaptation; sustainable use and protection of water and marine resources; transition to a circular economy, waste prevention and recycling; pollution prevention and control; and protection of healthy ecosystems (which includes biodiversity conservation).
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European Securities and Markets Authority Seeks Clarity on the Ancillary Activity Exemption under MiFID II
04/09/2018
The European Securities and Markets Authority has published a letter from its Chair, Steven Maijoor, to the European Commission seeking clarification on how to interpret the ancillary activity exemption under the revised Markets in Financial Instruments Directive.
MiFID II exempts non-financial entities that deal on own account, or provide investment services to clients, in commodity derivatives from having to obtain authorization as an investment firm under MiFID II provided that, among other things, this activity is ancillary to their main business. The provisions of MiFID II are supplemented by a Commission Delegated Regulation setting out the Regulatory Technical Standard on the criteria to establish when an activity is considered to be ancillary to the main business. The wording of both MiFID II and the RTS suggest that the tests for whether activity is ancillary should be carried out at the level of the entity's group. However, some drafting amendments that were introduced by the Commission have led to uncertainty as to whether the tests should be carried out at the level of the entity rather than at group level.
ESMA states that it would not be appropriate for it to address this uncertainty through its usual Questions and Answers and invites the Commission to provide further guidance on the interpretation and implementation of the ancillary activity criteria, in particular on the level at which the tests should be applied.
View the ESMA letter.
View the Commission Delegated Regulation (2017/592). -
UK Financial Conduct Authority Publishes its 2018/19 Business Plan
04/09/2018
The Financial Conduct Authority has published its Business Plan for 2018/19 which sets out its key priorities for the coming year. The FCA confirms that it will continue to focus on issues relating to the U.K.'s withdrawal from the EU by working with the Government, ensuring appropriate transition measures for EEA firms, working towards operational readiness and cooperating at international level.
The FCA divides the remainder of its priorities into cross-sector priorities and sector priorities. There are seven cross-sector priorities: firms' culture and governance; financial crime and anti-money laundering; data security, resilience and outsourcing; innovation, big data, technology and competition; treatment of existing customers; long-term savings, pensions and intergenerational differences; and high-cost credit. There are seven sector priority areas: wholesale financial markets; investment management; retail lending; pensions and retirement income; retail investments; retail banking; and general insurance and protection. The FCA also published Sector Views for each of these sectors which provide an FCA view of how each sector was performing as of mid-2017.
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UK Financial Conduct Authority Confirms Regulatory Status of Cryptocurrency Derivatives
04/06/2018
The Financial Conduct Authority has published a statement confirming the regulatory requirements applicable to firms engaged in cryptocurrency derivatives. The FCA does not regulate cryptocurrencies, provided that they do not form part of other regulated services or products. However, the FCA states that cryptocurrency derivatives may be categorized as financial instruments under the revised Markets in Financial Instruments Directive II and that firms carrying out regulated activities in cryptocurrency derivatives should comply with the FCA's Handbook rules as well as the directly applicable EU provisions. The FCA points out that dealing in, arranging transactions in, advising on or providing other services that are regulated activities in relation to derivatives that reference cryptocurrencies or tokens issued through an Initial Coin Offering will require FCA authorization.
View the FCA's statement. -
International Standards Body Recommendations for Secondary Corporate Bond Market Transparency and Regulatory Reporting
04/05/2018
The International Organization of Securities Commissions has published a final report on regulatory reporting and public transparency in the secondary corporate bond markets. The report discusses the importance to robust capital markets of making information accessible to regulators and the public via regulatory reporting requirements and pre- and post-trade transparency requirements respectively. The report discusses the approach taken in various jurisdictions to impose these requirements before setting out seven recommendations for national regulators.
The recommendations update IOSCO's 2004 report, "Transparency of Corporate Bond Markets," which discussed the then-existing transparency arrangements for corporate bond markets, as well as the regulatory regimes that were in place in member jurisdictions and set out Core Measures for national regulators to consider to ensure adequate transparency and regulatory reporting arrangements. The recommendations also take into account IOSCO's 2017 report, "Examination of the Liquidity of the Secondary Corporate Bond Markets," which set out the findings of an evidence-based examination of the state of secondary corporate bond markets from 2004 until approximately 2015 and provided a detailed overview and discussion of the markets and how they had evolved since 2004.
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European Securities and Markets Authority Confirms Product Intervention for Contracts for Difference and Binary Options
03/27/2018
The European Securities and Markets Authority has confirmed that it will use its product intervention powers under the Markets in Financial Instruments Regulation to prohibit the marketing, distribution and sale of binary options to retail investors. It will also impose a number of restrictions on the marketing, distribution and sale of Contracts for Difference to retail investors. Both CFDs and binary options have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by providers and distributors of the products.
Read more. -
Final Draft EU Technical Standards Amending Systematic Internalisers' Quote Rules
03/26/2018
The European Securities and Markets Authority has published a final report and final draft amending Regulatory Technical Standards to amend the RTS on the equity transparency obligations of trading venues and investment firms (Commission Delegated Regulation (EU) 2017/587, known as RTS 1). The Markets for Financial Instruments Regulation requires Systematic Internalisers to make public firm quotes in equity instruments. The quotes must: (i) be at least equivalent of 10% of the standard market size for the quoted instrument; (ii) include both a bid and offer price; and (iii) reflect the prevailing market conditions for that instrument. RTS 1 specifies the concept of "prices reflecting prevailing market conditions" as being "close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity".
ESMA considers that this concept needs to be further elaborated and consulted on proposed amendments last year. ESMA has not made any changes to its proposal. The final draft amending RTS provide that the quotes of an SI can only adequately reflect prevailing market conditions when the quotes reflect the minimum price increments ('tick sizes') quoted for a financial instrument on a trading venue.
Read more.Topic : MiFID II -
European Securities and Markets Authority Issues Opinion on Application of MiFIR Trading Obligation to Package Orders
03/21/2018
The European Securities and Markets Authority has published an Opinion on the treatment of package orders in the context of the trading obligation for derivatives under the Markets in Financial Instruments Regulation. The trading obligation requires that the trading of certain derivatives must take place on a regulated market, multilateral trading facility, organised trading facility or on an equivalent third-country trading venue.
Package orders are used by investment firms and their clients to conduct trades for risk management and hedging purposes. They are composed of two or more financial instruments that are priced as a single unit. The execution of each component is simultaneous and contingent upon on the execution of all the other components. Under MiFIR, the trading obligation is designed to apply at instrument level, not package level – the obligation attaches to the components of a package, but not to the package as a whole. Difficulties may arise where a package order contains a mixture of instruments, where some are subject to the trading obligation while others are not. ESMA considers that the components of a package need to be executed on a trading venue only where it is feasible to do so without creating undue operational or execution risk.
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European Commission Proposed Legislation to Regulate Cross-Border Crowdfunding Service Providers
03/08/2018
The European Commission has published a proposed Regulation on European Crowdfunding Service Providers for Business. The proposed ECSP Regulation is part of the EU Capital Markets Union initiative and the Commission's FinTech Action Plan. It aims to increase access to finance through crowdfunding for innovative companies, start-ups and SMEs.
The Commission is seeking to introduce an "EU label for crowdfunding service providers" which would be authorized and supervised by the European Securities and Markets Authority and able to passport their services across the EU. Currently, different EU Member States apply different levels of regulatory requirements to CSPs. Some Member States require CSPs to comply with onerous obligations under the Markets in Financial Instruments package, some apply more lenient regimes, while others allow CSPs to benefit from exemptions and remain unregulated. The Commission's view is that this divergence hampers the potential scaling-up of crowdfunding activity, because CSPs need to comply with different legal and regulatory requirements and adjust their business models accordingly if they want to provide services in more than one EU Member State. The Commission is not proposing that current national frameworks be repealed. Instead, those frameworks can continue to exist, which will allow CSPs to choose to either provide or continue providing services on a domestic basis under national laws or to provide services under the proposed ECSP Regulation. However, the Commission is proposing that the MiFID II Directive be amended to exclude CSPs from its obligations.
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European Commission Calls for Acceleration of Completion of the Capital Markets Union
03/08/2018
The European Commission has published a Communication on completing the Capital Markets Union by 2019. The Communication confirms the Commissions commitment to completing the CMU by mid-2019 and announces the publication of the FinTech Action Plan, including a proposed Regulation on Crowdfunding, and the Sustainable Finance Action Plan. Legislative proposals on covered bonds, the cross-border distribution of collective investment funds and the law applicable to third-party effects of assignment are expected to be published on March 12, 2018. In May 2018, the Commission intends to publish a proposed Directive on credit servicers, credit purchasers and the recovery of collateral as well as impact assessments on the SME listing regime and the resolution of investment disputes.
The Commission states that completion of the CMU is more urgent due to the impending exit by the UK from the EU because the UK is currently the EUs largest financial centre. The Commission notes that an effective CMU will need to "open-up markets to give better access to finance for EU businesses and more and innovative investment opportunities for savers."
Read more. -
European Securities and Markets Authority Releases Double Volume Cap Data for Dark Pool Trading
03/07/2018
The European Securities and Markets Authority has published on its website trading volumes and calculations for the purposes of the Double Volume Cap under the Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation. The published data covers the periods January 1, 2017 to December 31, 2017 and February 1, 2017 to January 31, 2018.
The DVC has been introduced under MiFIR as a measure to limit the amount of dark pool trading, which can harm price formation in equity markets. The DVC places a cap on the volume of equities trading using two of the available waivers from the pre-trade transparency obligations of the MiFIR, namely the negotiated transaction waiver and the reference price waiver. The double cap comprises a per-venue cap of 4% of the total volume of trading in a particular financial instrument on all EU trading venues across over the previous 12 months and an EU-wide cap of 8%. ESMA is required to publish reports on the volume of trades that have relied on the waivers. National regulators must suspend, for six months, trading under the waivers that exceeds either of the caps.
The publication of the data follows a delay announced by ESMA in January 2018 due to issues with the quality and completeness of data that had been submitted.
View the ESMA press release. -
International Standards Body Proposes Recommendations for Trading Venues on Managing Extreme Market Volatility
03/07/2018
The International Organization of Securities Commissions has launched a consultation on proposed recommendations for trading venues and their regulators to consider when implementing, operating and monitoring volatility control mechanisms to preserve orderly trading. The consultation supports IOSCO’s objective of ensuring that markets are fair, efficient and transparent and focuses on automatic volatility interruptions and mechanisms to halt trading or reject orders.
Read more. -
UK Regulators Highlight Expectations and Consult on Algorithmic Trading Supervision
02/12/2018
The UK Financial Conduct Authority and Prudential Regulation Authority have published co-ordinated papers on their expectations around firms' use of algorithmic trading strategies in wholesale markets. Firms have had to comply, since January 3, 2018, with new requirements introduced by the revised Markets in Financial Instruments Directive and related Regulatory Technical Standards. The FCA's paper sets out the applicable regulatory requirements and provides examples of good and poor practice for firms regulated by the FCA. Firms that are dual-regulated by the FCA and the PRA should also review the PRA paper, which takes the form of a formal consultation on a proposed Supervisory Statement, covering the PRA's expectations regarding firms' governance and risk management. The PRA consultation runs until May 7, 2018.
Read more.Topic : MiFID II -
European Securities and Markets Authority Outlines 2018 Plans for EU Supervisory Convergence
02/07/2018
In addition to the key priorities, the 2018 programme also sets out ESMA key objectives and main planned outputs in relation to a number of thematic and cross-cutting issues, including: investor protection and intermediaries; secondary markets; investment management; market integrity (including market abuse and benchmarks); post-trading (including CCPs, securities financing and settlement); corporate finance (in particular the new prospectus regime); corporate reporting; market data; financial innovation; IT infrastructure; and peer reviews.
The European Securities and Markets Authority has published its Supervisory Convergence Work Programme for 2018. It highlights a total of five key priorities for its work on supervisory convergence in 2018, comprised of three ongoing priorities (application of the revised Markets in Financial Instruments framework, data quality and investor protection) and two new priorities (Brexit and financial innovation).
Read more.
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European Securities and Markets Authority Considers Product Intervention for Contracts for Difference and Binary Options
01/18/2018
The European Securities and Markets Authority has issued a call for evidence on the possible use of its product intervention powers under the Markets in Financial Instruments Regulation to impose restrictions and/or prohibitions on the marketing, distribution and sale of contracts for difference and binary options to retail investors.
Read more. -
Final EU Regulations on the Scope of the Consolidated Tape for Non-Equity Financial Instruments
01/17/2018
A Commission Delegated Regulation amending the Regulatory Technical Standards on authorization, organizational requirements and the publication of transactions for data reporting services providers under the revised Markets in Financial Instruments Directive has been published in the Official Journal of the European Union.
MiFID II requires consolidated tape providers to collect post-trade information published by trading venues and approved publication arrangements and to consolidate this into a continuous live data stream made available to the public, both for equity instruments and non-equity products.
The amending Regulation adds provisions to the existing RTS to set out the scope of the consolidated tape for non-equity products (i.e., bonds, structured finance products, emission allowances and derivatives). In particular, the amending Regulation:
• permits non-equity CTPs to specialize in one or more asset classes to increase the likelihood of a viable business case for non-equity consolidated tape provision;
• specifies the APAs and trading venues that have to be included in the non-equity consolidated tape, based on the required consolidated tape coverage ratio of 80% of all transactions published in an asset class in the EU; and
• requires CTPs to reach minimum coverage ratios by January 1, 2019.
The amending Regulation applied from January 3, 2018. However, the provisions relating to CTPs will apply from September 3, 2019. The amending Regulation does not differ substantively from the final draft RTS submitted to the European Commission on March 31, 2017.
View the amending Regulation.Topic : MiFID II -
UK Financial Conduct Authority Highlights Firms' Failings in Providing and Distributing Contracts for Difference
01/10/2018
The Financial Conduct Authority has published a "Dear CEO" letter that was sent to firms that offer contracts for difference products to retail customers on either an advisory or discretionary portfolio management basis (including pursuant to limited power of attorney). The "Dear CEO" letter follows a review conducted by the FCA which assessed internal processes, policies, controls and oversight arrangements at a sample of 19 providers and 15 distributors of CFD products to retail customers. The "Dear CEO" letter identifies a number of areas of concern: target market identification and alignment of the target market to the characteristics of the product; communication, oversight and challenge; the process for taking on new distributors; management of conflicts of interest; the use of management information and key performance indicators; client categorisation; and remuneration arrangements.
The FCA considers that there is a high risk that firms across the sector are not meeting its rules and expectations when providing and distributing CFDs and that consumers are likely to experience poor outcomes unless these poor practices are addressed. The letter highlights the need for firms overall to improve a number of oversight and control arrangements to reach the standard required by FCA rules and guidance. The FCA will conduct further work on CFDs and firms may be asked to take part in a follow-up review to assess how they have responded to the feedback in the Dear CEO letter. The FCA will also be assessing firms' compliance with the new Product Intervention and Product Governance sourcebook, which came into effect on January 3, 2018, implementing as rules the product governance requirements of the revised Markets in Financial Instruments Directive.
View the "Dear CEO" letter. -
European Securities and Markets Authority Announces Delay to Publication of Double Volume Cap Data
01/09/2018
The European Securities and Markets Authority has announced that it will delay the publication of data for January 2018 on the double volume cap mechanism introduced by the Markets in Financial Instruments Regulation from January 3, 2018. The DVC mechanism introduced by MiFIR seeks to ensure that dark pool trading using waivers from pre-trade transparency requirements does not unduly harm price formation. It does so by capping the amount of trading for orders placed in systems which are based on a trading methodology using the reference price waiver and certain transactions using the negotiated price waiver.
ESMA expects to work with national regulators and trading venues to address issues it has identified with the quality and completeness of the data it has so far received from trading venues. It hopes to publish the data in March 2018.
View the press release.Topic : MiFID II -
EU Trading Venues and CCPs Exempted from the Open Access Requirements for Exchange-Traded Derivatives
01/09/2018
The European Securities and Markets Authority has published a list of trading venues exempt from the open access requirements of the Markets in Financial Instruments Regulation under transitional arrangements for exchange-traded derivatives under the "de minimis" principle. Various national regulators have also delayed the coming into effect of the open access requirements of MiFID II for clearing houses.
MiFIR requires a trading venue to provide open and non-discriminatory access to a CCP so that a CCP can clear trades concluded on a trading venue of their choice, which will in turn allow the members of a trading venue to select the CCP they wish to use for clearing. There is a reciprocal requirement on CCPs to provide open and non-discriminatory access to a trading venue that wishes to clear financial instruments through a particular CCP. These provisions are controversial since they mean that valuable intellectual property and IT systems developed by exchanges effectively must be made available to competitors or new market entrants. It has been argued that the open access requirements make the EU unattractive as a location for exchange businesses due to commercial disadvantages that result for those exchanges which have successfully invested in innovation.
MiFIR provides for a transitional opt-out from the open access requirements for trading venues and clearing houses in relation to ETDs provided that certain criteria are met. ESMA's list specifies four trading venues from Spain, Poland, Norway and Greece that have had their application for exemption approved and one from Sweden whose approval is pending. The four trading venues - MEFF Sociedad Rectora del Mercado de Productos Derivados S.A.U., Giełda Papierów Wartościowych w Warszawie S.A., Oslo Børs ASA and Athens Exchange S.A. - are exempt from the MiFIR open access requirements until July 3, 2020.
Read more.Topic : MiFID II -
EU Derivatives Trading Obligation Enters Into Force
12/22/2017
A Commission Delegated Regulation on the derivatives trading obligation under the Markets in Financial Instruments Regulation has been published in the Official Journal of the European Union.
The trading obligation is applicable to classes of derivatives that: (i) have been declared subject to the clearing obligation under the European Market Infrastructure Regulation, (ii) are admitted to trading or traded on at least one EU trading venue (a regulated market, multilateral trading facility, organized trading facility or a third country equivalent trading venue) and (iii) are sufficiently liquid. The trading obligation applies to financial counterparties and to non-financial counterparties. Where a class of derivatives is determined to be subject to the MiFIR trading obligation, such derivative may only be traded on a third country trading venues if it has been determined to be equivalent by the European Commission.
Read more. -
European Securities and Markets Authority Issues Statement on Introduction of the Legal Entity Identifier Requirements Under the Markets in Financial Instruments Regulation
12/20/2017
The European Securities and Markets Authority has published a statement in response to indications that not all investment firms will succeed in obtaining Legal Entity Identifier codes from all their clients that are legal persons ahead January 3, 2018 when the Markets in Financial Instrument Regulation takes effect. There is also concern that trading venues may not obtain LEI codes for non-EU issuers in time.
Under MiFIR, investment firms are required to identify all clients that are legal persons with an LEI code. An investment firm is acquired to obtain the LEI code of a client prior to providing any service that triggers the obligation to submit a transaction report for a transaction entered into on behalf of a client who is eligible for the LEI code. Trading venues must also identify each issuer of a financial instrument traded on their systems with an LEI code when making daily submissions to the Financial Instruments Reference Data System.
Read more.Topic : MiFID II -
European Implementing Technical Standards for Passporting Under the Revised Markets in Financial Instruments Directive Published
12/20/2017
Commission Implementing Regulation (EU) 2017/2382 has been published in the Official Journal of the European Union and will take effect on January 3, 2018.
The Implementing Regulation contains Implementing Technical Standards on the standard forms and templates that should be used for notifications and the procedures for the transmission of information when investment firms, market operators operating a multilateral trading facility or organised trading facility, and, where required by the revised Markets in Financial Instruments Directive, credit institutions, want passport investment services or perform activities in another Member State.
View the Implementing Regulation.Topic : MiFID II -
European Commission Declares Stock Exchanges in Switzerland Equivalent for the Purposes of the Shares Trading Obligation Under MiFID II
12/20/2017
The European Commission has adopted an Implementing Decision declaring the two Swiss stock exchanges equivalent for the purpose of the shares trading obligation under the Markets in Financial Instruments Regulation. MiFIR requires EU investment firms to ensure that the trades they undertake in shares admitted to trading on a regulated market or traded on a trading venue take place on a regulated market, multilateral trading facility, systematic internaliser or equivalent third-country trading venue.
The legal and supervisory framework of SIX Swiss Exchange AG and BX Swiss AG have been assesses as equivalent to the requirements of MiFIR, the revised Markets in Financial Instruments Directive, the Market Abuse Regulation and the Transparency Directive.
Read more.Topic : MiFID II -
European Securities and Markets Authority Updates its Procedure and Template for Reporting of Circuit Breakers’ Parameters by National Regulators
12/19/2017
The European Securities and Markets Authority has published a revised procedure and a harmonized template to be used by national regulators in reporting to ESMA the parameters to halt or constrain trading used by the trading venues under their jurisdiction. The revised Markets in Financial Instruments Directive places obligations on national regulators to require a regulated market in their jurisdiction to be able to temporarily halt or constrain trading if there is significant price movement in a financial instrument on that market or a related market during a short period and, in exceptional cases, to be able to cancel, vary or correct any transaction. The regulated market must report the parameters for halting trading and any material changes to those parameters to the national regulator and the national regulator must in turn report them to ESMA.
The ESMA procedure and template is designed to establish a common format for national regulators to use for the reports they make to ESMA. However, national regulators can, if they wish, require trading venues to report to them the parameters using a different and/or more granular format.
Read more.Topic : MiFID II -
European Commission Consults on Improving the SME Markets
12/18/2017
The European Commission has published a consultation paper in which it seeks views on the main challenges for SME-dedicated markets and possible changes to EU legislation that might help build the EU high-growth SME markets. The consultation paper follows previous consultations and papers relating to the Capital Markets Union Action Plan.
The consultation focuses on SME Growth Markets, a new type of trading venue introduced under the Markets in Financial Instruments package. The consultation paper is split into two sections, the first of which considers the main drivers behind the downward trend of SME initial public offerings and bond issuances. The second section considers specific regulatory barriers to SME markets, small issuers and the local ecosystems surrounding SME markets. In particular, the Commission is seeking views on the MiFID II provisions which set the scope of SME Growth Markets, the market requirements for SME issuers to be assisted by a key adviser, delisting rules on SME Growth Markets and transfer of listings.
Read more. -
European Securities and Markets Authority Issues Revised Guidance on Post-Trade Transparency and Position Limits When Transacting on Non-EU Trading Venues
12/15/2017
The European Securities and Markets Authority has published two revised Opinions providing further guidance on the post-trade transparency and position limits requirements relating to transactions on non-EU trading venues under the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation. ESMA first published the Opinions in May 2017.
The first Opinion sets out ESMA's view on determining third-country trading venues for the purpose of transparency under MiFIR. MiFIR requires EU investment firms to make information on transactions in financial instruments traded on a trading venue public. Details of actual transactions must be made public as close to real time as possible – for equities, within one minute of trading, and for non-equities, within 15 minutes (reducing to five minutes in 2020). The Opinion sets out ESMA's view of which transactions between EU and non-EU firms, and which transactions conducted on third-country trading venues should be subject to these post-trade transparency requirements. The Opinion provides objective criteria for identifying those third-country venues that have similar post-trade transparency requirements as EU trading venues. Trades on third-county venues that satisfy the criteria will not need to be made transparent post-trade.
Read more. -
EU Clamps Down on Systematic Internalisers Operating Broker-Crossing Networks under MiFID II
12/13/2017
An amending Delegated Regulation has been published in the Official Journal of the European Union which closes a loophole in the Markets in Financial Instruments Directive provisions relating to systematic internalisers. In February this year, the European Securities and Markets Authority highlighted the possibility that investment firms operating broker-crossing networks might try to circumvent the MiFID II requirements by setting up networks of connected SIs which would allow SIs to cross third party buying and selling interests via matched principal trading or other types of back-to-back transactions.
Read more.Topic : MiFID II -
European Commission Declares Trading Venues in Australia, Hong Kong and USA Equivalent Under the Revised Markets in Financial Instruments Directive
12/13/2017
The European Commission has adopted Implementing Decisions for equivalence of the legal and supervisory framework of Australia, Hong Kong and the USA for national securities exchanges and alternative trading systems in accordance with the revised Markets in Financial Instruments Directive.
MiFID II requires EU investment firms to ensure that the trades they undertake in shares admitted to trading on regulated markets, or traded on trading venues should take place on regulated markets, multilateral trading facilities or systematic internalisers, or third-country trading venues assessed by the European Commission as equivalent. These latest three equivalence decisions by the European Commission will allow investment firms to comply with MiFID II when shares are traded on trading venues in these three countries.
View Implementing Decision for Australia.
Topic : MiFID II -
Final UK Domestic Legislation Published Implementing the Revised Markets in Financial Instruments Directive
12/13/2017
The Financial Services and Markets Act 2000 (Markets in Financial Instruments) (No. 2) Regulations 2017 have been published, and will take effect mainly from January 3, 2018. Some technical provisions will come into force a day earlier, on January 2, 2018, for the purpose of making corrections to other legislation in advance of the implementation date for the revised Markets in Financial Instruments Directive.
Read more.Topic : MiFID II -
UK Financial Conduct Authority Publishes Measures to Improve the UK Financial Advice Market
12/08/2017
The Financial Conduct Authority has published a Policy Statement setting out new Handbook rules and guidance to implement some of the recommendations arising from the Financial Advice Market Review launched by the FCA jointly with HM Treasury in August 2015.
Read more. -
EU Equivalence Decision on US Derivatives Trading Venues Published
12/05/2017
The European Commission has adopted a Commission Implementing Decision on the equivalence of the legal and supervisory framework applicable to designated contract markets and swap execution facilities in the United States for the purposes of the trading obligation for derivatives under the Markets in Financial Instruments Regulation. From January 3, 2018 MiFIR will require that derivatives declared subject to the trading obligation must be traded on EU trading venues or third-country trading venues recognized by the European Commission as equivalent. Derivatives that will be subject to the trading obligation are euro, dollar and pound interest rate swaps in the most common benchmark tenors, as well as index-based credit default swaps.
Read more. -
Secondary EU Legislation Published on Criteria for Identifying a Liquid Market for Package Orders
11/28/2017
A Commission Delegated Regulation has been published in the Official Journal of the European Union, on the criteria for identifying a liquid market for package orders under the Markets in Financial Instrument Regulation.
The Delegated Regulation sets out criteria for identifying package orders for which there is a liquid market as a whole and provides further asset-class specific criteria to be met where a package order consists exclusively of interest rate derivatives, equity derivatives, credit derivatives or commodity derivatives.
View the Commission Delegated Regulation.Topic : MiFID II -
EU Technical Standards Aligning Indirect Clearing Requirements for MiFID II and EMIR Published
11/21/2017
The final Regulatory Technical Standards under the Markets in Financial Instruments Regulation on indirect clearing arrangements for exchange-traded derivatives and amending RTS under the European Market Infrastructure Regulation on indirect clearing arrangements for OTC derivatives have been published in the Official Journal of the European Union. The versions published are equal to those which were adopted by the European Commission on September 22, 2017. Indirect clearing refers to a situation where two or more entities are intermediaries standing between a client and a CCP in a contractual chain. EMIR established RTS on indirect clearing arrangements applicable to OTC products and MiFID extends these rules and principles to exchange-traded products. The EMIR RTS is now being revised to align with the new MiFIR RTS. Both pieces of legislation allow for indirect clearing arrangements to be established, and establish structures intended to result in equivalent protections for indirect clearing to those available for direct clearing (where only one intermediary exists). Various requirements in relation to segregation and portability at client, clearing member and CCP level are established and new required procedures to manage client defaults apply at clearing member level. Two new kinds of accounts must be established at client, clearing member and CCP level which enable such persons to distinguish indirect client positions and collateral from own account client positions and collateral.
The RTS and the amending RTS will enter into force on December 11, 2017 and will apply from January 3, 2018.
View the RTS on indirect clearing under MiFIR.
View the amending RTS on indirect clearing under EMIR.
View the existing RTS on indirect clearing under EMIR. -
Court of Justice of the European Union Ruling on Scope of a Regulated Market Under MiFID
11/16/2017
The Court of Justice of the European Union has given a preliminary ruling on the meaning and scope of "regulated market" under the Markets in Financial Instruments Directive following a referral by the Dutch Administrative Court of Appeal for Trade and Industry. A regulated market is defined in MiFID I as "a multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments - in the system and in accordance with its non-discretionary rules - in a way that results in a contract, in respect of the financial instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly and in accordance with the provisions of Title IIII". The definition is unchanged in MiFID II which will replace MiFID I from January 3, 2018.
Read more. -
European Securities and Markets Authority Issues Alerts to Firms and Investors on Initial Coin Offerings
11/13/2017
The European Securities and Markets Authority has published a statement alerting investors about the high risks of investment in Initial Coin Offerings, including the risk of total loss of their investment. The statement is accompanied by an alert to EU firms involved in ICOs reminding them of their regulatory obligations.
Read more. -
European Securities and Markets Authority Consults on Amending Systematic Internalisers' Quote Rules
11/09/2017
The European Securities and Markets Authority has published a consultation proposing amendments to the Regulatory Technical Standards on the equity transparency obligations of trading venues and investment firms (Commission Delegated Regulation (EU) 2017/587, known as 'RTS 1') under the Markets for Financial Instruments Regulation. MiFIR requires Systematic Internalisers to make public firm quotes in equity instruments. The quotes must: (i) be at least equivalent of 10% of the standard market size for the quoted instrument; (ii) include both a bid and offer price; and (iii) reflect the prevailing market conditions for that instrument. RTS 1 specifies the concept of 'prices reflecting prevailing market conditions' as being 'close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity'. ESMA is of the view that this specification needs to be amended because the quotes of an SI can only adequately reflect prevailing market conditions when the quotes reflect the minimum price increments ('tick sizes') quoted for a financial instrument on a trading venue.
Read more.Topic : MiFID II -
EU Technical Standards on Investment Firm Authorization Published
10/26/2017
A Commission Delegated Regulation with Regulatory Technical Standards on information and requirements for the authorization of investment firms under the revised Markets in Financial Instruments Directive has been published in the Official Journal of the European Union. MiFID II provides the requirements and conditions for authorization of an investment firm. The RTS set out the information that a firm applying for authorization as an investment firm must submit to the relevant national regulator. The information includes general corporate information, information on the applicant's sources of capital and financial situation, information on the applicant's shareholders, management body and persons who direct the business and information on the organization of the firm.
Read more.Topic : MiFID II -
EU Technical Standards on Acquisitions of Qualifying Holdings in Investment Firms Published
10/26/2017
A Commission Delegated Regulation with Regulatory Technical Standards on the information requirements for notification by a proposed acquirer of its proposed acquisition of a qualifying holding of an investment firm under the Markets in Financial Instruments Directive and the revised Markets in Financial Instruments Directive has been published in the Official Journal of the European Union. Both MiFID and MiFID II require that acquisitions of an investment firm or a qualifying holding in an investment firm are subject to prior approval by the relevant regulator. A qualifying holding is a direct or indirect holding in an investment firm of 10% or more of the capital or voting rights. The RTS set out the information that an acquirer must submit to a national regulator so that it can assess the proposed acquisition. The information includes that of the proposed acquirer, the persons who will direct the business of the target entity, the new proposed group structure and its impact on supervision and financing of the acquisition. The RTS also provide for the information requirements to be reduced where the proposed acquirer is an EU authorized entity and where the target entity does not hold client assets, is not authorized to undertake proprietary trading or underwriting of financial instruments and, if the target is authorized as a portfolio manager, the assets under management by the target are less than EUR 500 million.
Read more.Topic : MiFID II -
European Securities and Markets Authority Launches Next Stage of EU Reporting System
10/16/2017
The European Securities and Markets Authority has announced the launch of the second phase of its Financial Instrument Reference Database (FIRDS). FIRDS covers the requirements under both the Markets in Financial Instruments Regulation and the Market Abuse Regulation for reference data collection, transparency reporting obligations, submission of the Double Volume Cap data and the transaction exchange reporting mechanism. With the launch, ESMA is providing access to the database holding the currently available reference data that market participants will use to identify instruments subject to the reference data reporting requirements. The aim of the launch is to assist market participants in preparing their systems in advance of the obligation coming into effect on January 3, 2018.
View ESMA's announcement. -
US and EU Announce Common Approach to Derivatives Trading Venues
10/13/2017
The European Commission and the US Commodity Futures Trading Commission have published a joint statement announcing a common approach for recognizing certain derivatives trading venues authorized in the EU and the US for the purposes of the trading obligation. The Markets in Financial Instruments Regulation imposes a trading obligation on EU financial counterparties and non-financial counterparties for transactions in derivatives that: (i) have been declared subject to the clearing obligation under the European Market Infrastructure Regulation; (ii) are admitted to trading or traded on at least one EU trading venue (a regulated market, multilateral trading facility or organized trading facility) or a third-country equivalent trading venue; and (iii) are sufficiently liquid. The European Commission may adopt an equivalence decision declaring that certain third-country trading venues are subject to an equivalent legal, supervisory and enforcement regime to the EU requirements under MiFID II and the Market Abuse Regulation. The common approach signifies that it is intended that the European Commission will adopt an equivalence decision for swap execution facilities and designated contract markets regulated by the CFTC. Similarly, the CFTC will exempt MTFs and OTFs from the requirement to register as SEFs.
Read more. -
European Securities and Markets Authority Urges Compliance with Legal Entity Identifier for MiFID II Purposes
10/09/2017
The European Securities and Markets Authority has published a briefing on the Legal Entity Identifier for compliance with the revised Markets in Financial Instruments package. MiFID II has applied across the EU since January 3, 2018. The LEI provides a clear and unique identification of legal entities participating in financial instruments. Firms need an LEI to ensure compliance with their reporting obligations under a number of existing EU regulations and directives, including the European Market Infrastructure Regulation, the Market Abuse Regulation and the Securities Financing Transactions Regulation. The purpose of ESMA's briefing is to flag to investment firms, investment firm clients, trading venues, issuers and Approved Reporting Mechanism firms that they will need an LEI to fulfil their obligations under MiFID II. In addition, the use of the LEI is required, or is in the process of being implemented, in other jurisdictions, including the United States, Canada and Asia-Pacific.
View the briefing.Topic : MiFID II -
Non-Equity Transactions with Certain Non-EU Central Banks Exempt from Trade Transparency Requirements under MiFID II
10/07/2017
A Commission Delegated Regulation exempting compliance with the pre- and post-transparency requirements for non-equity transactions with the Bank for International Settlements and the central banks of 12 third countries has been published in the Official Journal of the European Union. The Market in Financial Instruments Regulation, which applies from January 3, 2018, exempts transactions from the trade transparency rules where a member of the European System of Central Banks is a counterparty to the transaction, provided that the transaction is entered into in the performance of monetary, foreign exchange or financial stability policy and the central bank notifies its counterparty that the exemption applies. The exemption does not apply to transactions entered into by a member of the ESCB in the performance of their investment operations. MiFIR allows the European Commission to extend the exemption to other central banks. The Delegated Regulation provides for the exemption to be extended to the BIS and to central banks in Australia, Brazil, Canada, Hong Kong, India, Japan, Mexico, the Republic of Korea, Singapore, Switzerland, Turkey and the US. The list may be amended in the future to add or remove a central bank. The Delegated Regulation enters into force on October 27, 2017, and will apply from January 3, 2018.
View the Delegated Regulation.Topic : MiFID II -
European Securities and Markets Authority Finalizes Guidelines for Management of Exchanges and Data Reporting Service Providers
09/28/2017
The European Securities and Markets Authority has published final Guidelines on the requirements for the management body of market operators and Data Reporting Services Providers. The revised Markets in Financial Instruments Directive requires all members of the management body of any market operator to be of sufficiently good repute, possess sufficient knowledge, skills and experience to perform their duties, to commit sufficient time to perform their functions and to act with honesty, integrity and independence of mind. Market operators must also promote diversity and allocate adequate human and financial resources to the induction and training of the management body. Similar requirements are placed on the management body of DRSPs, but DRSPs are not required to promote diversity and allocate adequate human and financial resources to the induction and training of the management body.
Read more.Topic : MiFID II -
EU Final Draft Technical Standards on the Trading Obligation for Derivatives Published
09/28/2017
The European Securities and Markets Authority has published a final Report and final draft Regulatory Technical Standards on the trading obligation for derivatives under the Markets in Financial Instruments Regulation. The trading obligation is applicable to classes of derivatives that: (i) have been declared subject to the clearing obligation under the European Market Infrastructure Regulation, (ii) are admitted to trading or traded on at least one EU trading venue (a regulated market, multilateral trading facility, organized trading facility or a third country equivalent trading venue) and (iii) are sufficiently liquid. The trading obligation will apply to financial counterparties and to non-financial counterparties. Where ESMA determines that a class of derivatives should be subject to the MiFIR trading obligation, third country trading venues would only be permissible for trading by EU entities when determined to be equivalent by the European Commission.
The final draft RTS on the trading obligation provide for the trading obligation to apply to fixed-to-float interest rate swaps denominated in euros, US dollars and pound sterling and to index credit default swaps (iTraxx Europe Main and iTraxx Europe Crossover). The trading obligation for both IRS and CDS will apply from January 3, 2018, unless the clearing obligation for a particular class of derivatives has not yet entered into force.
Read more. -
EU Plan for Waiver and Position Limits to be in Place by January 3, 2018
09/28/2017
The European Securities and Markets Authority has made a public statement on the joint work plan of ESMA and national regulators for opinions on pre-trade transparency waivers and position limits under the revised Markets in Financial Instruments package. MiFID II will apply from January 3, 2018.
MiFID II introduces a new position limit regime for commodity derivatives. National regulators will be required to establish and apply position limits on the size of a net position in commodity derivatives traded on trading venues and economically equivalent OTC contracts. The limits will apply to the size of a position that a person can hold. Position limits set by a national regulator must be confirmed in an opinion issued by ESMA.
The pre-trade transparency obligations require market operators and investment firms operating a trading venue to make public current bid and offer prices and the depth of trading interests at those prices which are advertised through their systems for equity and non-equity financial instruments.
Read more.Topic : MiFID II -
Financial Conduct Authority Outlines Methods for Firms to Comply With MiFID II Transaction Reporting Obligations
09/18/2017
The Financial Conduct Authority has devoted the September 2017 issue of its Market Watch newsletter to a discussion of aspects of FCA reporting functionality and the means by which firms can meet their reporting obligations under MiFID II from January 3, 2018. Market Watch issue 53 provides details of: (i) the requirement for firms subject to MiFID II transaction reporting obligations (and their eligible clients) to have a Legal Entity Identifier and what firms need to do to obtain one; (ii) how firms can apply to become a submitting entity to make submissions of market data via the FCA's Market Data Processor; (iii) the requirements external users will need to meet to be able to request extracts of transaction reports from the FCA via the MDP entity portal, which goes live on January 3, 2018; (iv) the ways in which operators of trading venues and investment firms can fulfill their market data reporting obligations by using outsourcing arrangements with third parties; and (v) clarification that Systematic Internalisers must submit instrument reference data to the FCA for financial instruments where the underlying instrument is a financial instrument traded on a trading venue, or an index or a basket composed of financial instruments traded on a trading venue.
Topic : MiFID II -
UK Financial Conduct Authority Issues Urgent Reminder on Applications for Authorization or Variation of Permission in Readiness for MiFID II
09/18/2017
The Financial Conduct Authority has issued a press release informing firms that applications to the regulator for authorization or variation of permission in time for MiFID II implementation are now urgent. The FCA has previously issued statements warning that firms requiring either new authorization or a variation to existing permissions needed to submit applications to the FCA by July 3, 2017, and that any submissions made after that date ran the risk that the FCA would not be able to determine the application in time for January 3, 2018.
The FCA considers that it has made good progress. However, any firms that have not yet submitted applications, or that have been contacted by the FCA for more information on a submitted application, must act without delay. Firms that have not yet submitted complete applications for new permissions must now also include contingency plans to allow for the possibility that permissions may not be in place by January 3, 2018.
The press release also highlights that some proprietary traders which are not currently authorized may need authorization under MiFID II, for example, proprietary traders that access trading venues by means of direct electronic access (DEA) provided by a regulated firm or which engage in algorithmic trading. Firms that provide DEA have a duty under MiFID II to carry out due diligence on their prospective DEA clients and the FCA suggests that these firms work closely with their clients to ensure they are aware of the potential need to be authorized.
View the Press Release.
View Client Briefing: Deadline Looms for Regulated Firms to Vary Their Permissions to Comply With MiFID II.
Topic : MiFID II -
European Commission Considers it Unnecessary to Exclude Exchange-Traded Derivatives From the Open Access Provisions of MiFIR
09/11/2017
The European Commission has published a Report to the European Parliament and the Council recommending that Exchange-Traded Derivatives (ETDs) do not need to be excluded from the scope of the provisions of the Markets in Financial Instruments Regulation that provide for open and non-discriminatory access to CCPs and to trading venues.
Read more. -
UK Financial Conduct Authority Consults on Allowing 31-90 Day Unbreakable Deposits for Holding Client Money
08/01/2017
The Financial Conduct Authority has launched a consultation on changes to its client money rules (CASS 7) to amend the existing 30-Day Rule under which firms are prevented from placing client money in bank accounts with unbreakable terms of longer than 30 days. The FCA introduced the 30-Day Rule in July 2014 to restrict the practice of some firms of depositing client money in unbreakable deposits for periods of up to years. The placing of client money in lengthy unbreakable terms attracts the risk of diminution if a firm is unable to withdraw that money in response to market events and the risk that client money may not be available for distribution in the case of a firm insolvency. Therefore, the FCA was (and remains) of the view that placing client money in unbreakable deposits for long periods is incompatible with the purpose of the client money regime. However, it is now proposing to allow the use of 31-90 day unbreakable deposits following feedback from firms about an increasing reluctance of banks to provide 30-day unbreakable deposits.
The reduced appetite from banks appears to have arisen due to the interaction between the 30-Day rule and the liquidity requirements of the prudential regime. All client money is subject to the Liquidity Coverage Ratio which requires banks to have highly liquid assets to cover 100% of their potential net cash outflows over 30 days. Unbreakable deposits of a maximum of 30 days are therefore capital inefficient.
Read more. -
European Securities and Markets Authority Publishes Procedure for Reporting of Circuit Breakers and Trading Halts by National Regulators
07/17/2017
The European Securities and Markets Authority has published a document formalizing a common standard and procedure for national regulators to follow when reporting to ESMA the details of the circuit breakers and trading halts used by the trading venues in their jurisdiction. This will assist national regulators with their MiFID II obligations to report to ESMA the details provided to them by trading venues operating in their territory. The common standard and procedure is designed to ensure consistency and comparability of reported parameters.
View the Procedure and Template.Topic : MiFID II -
European Securities and Markets Authority Issues Sector-specific Principles on Relocations from the UK to EU27 in the Context of the UK's Exit from the EU
07/13/2017
The European Securities and Markets Authority has published three Opinions setting out sector-specific principles for Brexit-related relocations in the sectors of investment management, investment firms and for secondary markets. These sector-specific Opinions build on a cross-sector Opinion published in May 2017. The principles do not set out any new legal requirements, but they are intended to serve as practical tools to support supervisory convergence among national regulators in EU27 countries when approached by UK market participants seeking to relocate in the content of the UK's exit from the EU. The Opinions have been published in the wake of reports that some member state regulators have been marketing their jurisdictions as locations for business and it has been thought that some regulators may have been offering a lighter-touch form of regulatory and especially "presence" standards than others.
The Opinions, which assume (without prejudice to ongoing negotiations) that the UK will become a third country on exit from the EU, highlight particular issues national regulators in EU27 should consider when considering applications from relocating market participants. Factors for close consideration include governance structure and internal control, the impact and influence of group membership, the nature and extent of proposed outsourcing arrangements and the need to mitigate the risk of letter-box entities. ESMA also recommends that national regulators consider co-operation arrangements with third country regulators where appropriate.
View Opinion on Investment Firms.
View Opinion on Investment Management.
View Opinion on Secondary Markets. -
European Securities and Markets Authority Consults on Guidelines on Certain Aspects of MiFID II Suitability Requirements
07/13/2017
The European Securities and Markets Authority has published for consultation draft Guidelines to enhance clarity and foster convergence in the implementation of certain aspects of the MiFID II suitability requirements. Whilst the requirements for firms offering financial advice or portfolio management to assess the suitability of products for their clients are not new, MiFID II's provisions enhance and strengthen the MiFID I requirements. ESMA has therefore built on the suitability Guidelines it issued in 2012, with clarifications, refinements and updates where necessary to reflect the MiFID II provisions. Annex IV to the consultation paper contains a correlation table between the proposed draft Guidelines and the corresponding 2012 Guidelines. The proposed draft Guidelines also take into account the results of supervisory activities conducted by national regulators on the application of suitability requirements as well as the technological evolution of the advisory markets (for example automated advice) and recent studies on behavioural finance.
ESMA invites comments on the draft Guidelines by October 13, 2017. It expects to publish a final report and final Guidelines in Q1/Q2 2018.
View the consultation paper.Topic : MiFID II -
Final Standards on Aggregation and Publication of Derivatives Data by Trade Repositories
07/10/2017
The European Securities and Markets Authority has published proposed amendments to its Regulatory Technical Standards under the European Markets Infrastructure Regulation, following a public consultation between December 2016 and February 2017. ESMA provided final draft RTS to the European Commission in 2012 specifying the frequency and the details of the information to be made available by Trade Repositories to the relevant authorities and the information to be published by TRs. The RTS also specified the operational standards required to aggregate and compare data across TRs and for the relevant authorities to have access to information as necessary.
Read more. -
UK Financial Conduct Authority Publishes Final Asset Management Market Study Report
06/28/2017
The Financial Conduct Authority has published the final report of the Asset Management Market Study it launched in November 2015. The object of the AMMS was to investigate three core areas: (i) how asset managers compete to deliver value; (ii) whether asset managers are willing and able to control costs and quality along the value chain; and (iii) how investment consultants affect competition for institutional asset management. Furthermore, the FCA wanted to look at whether there are any barriers to innovation that prevent investors from obtaining better results. The FCA published an interim AMMS report in November 2016 which set out the FCA's provisional assessment of the way competition works for asset management services, the consequences for investors and the FCA's proposed remedies to tackle the issues.
The final AMMS report confirms the FCA's interim findings and proposes a package of remedies. The FCA has divided the remedies into three buckets: (i) remedies on which it has published a consultation alongside the final report; (ii) final remedies; and (iii) remedies on which it intends to consult later.
Read more. -
Financial Conduct Authority Publishes Statement on the Suitability Review
05/18/2017
The Financial Conduct Authority has published the results of a review into the suitability of advice and quality of disclosure in the financial services sector.
Read more.Topic : MiFID II -
European Securities and Markets Authority Publishes Follow-up Report on MiFID Conduct of Business Rules Relating to Fair, Clear and Not Misleading Information
05/18/2017
The European Securities and Markets Authority has published a follow-up report analyzing the actions taken by ten national regulators to address their inadequate application of ESMA's good practices on applying the rules on the provision of fair, clear and not misleading information by regulated firms to clients under the Markets in Financial Instruments Directive. ESMA's assessment forms part of its preparation for the implementation of the MiFID II rules which come into effect on January 3, 2018.
The assessment used the same criteria as the original peer review: (a) organisation; (b) supervisory approach; (c) monitoring; (d) thematic work; and (e) complaints. Of the ten regulators, those in Lithuania, Lativia, Malta, Poland, Portugal and Romania had addressed all the deficiencies previously identified. For the remaining four, Denmark, Estonia, Greece and Cyprus, deficiencies remain, although ESMA has welcomed the efforts made to address them.
View the Report.Topic : MiFID II -
Prudential Regulation Authority Publishes Second Policy Statement on Implementing MiFID II
04/28/2017
The Prudential Regulation Authority has published a second Policy Statement and final rules implementing certain aspects of the Markets in Financial Instruments legislative package.
Read more.Topic : MiFID II -
European Securities and Markets Authority Publishes Final Guidelines on Circuit Breakers Under MiFID II
04/06/2017
The European Securities and Markets Authority has published Guidelines on the calibration of circuit breakers and the publication of trading halts under the revised Markets in Financial Instruments Directive. MiFID II requires regulated markets temporarily to halt or constrain trading if there is a significant price movement in a financial instrument (equity, equity-like and debt instruments) on that market or a related market in a short period. Regulated markets must also, in exceptional cases, cancel, vary or correct any transaction. ESMA is required to develop guidelines on the calibration of those trading halts, taking into account the liquidity of the different asset classes and sub-classes, the nature of the market model and types of users. The Final Guidelines outline further details on the parameters that trading venues should consider when calibrating their circuit breakers. ESMA emphasizes that consideration should be given not only to trading halts, but also order price collars. Trading venues should also immediately make public details of the activation of a trading halt, the type of trading halt, the trading phase in which it was triggered, the eventual extension and the end of the halt. National regulators have until two months from date of publication in all EU official languages to advise ESMA of whether or not they intend to comply with the final Guidelines.
View the Guidelines.Topic : MiFID II -
The European Securities and Markets Authority Publishes Draft Technical Standards Specifying the Scope of the Consolidated Tape for Non-Equity Financial Instruments
03/31/2017
The European Securities and Markets Authority has published its Final Report and final draft Regulatory Technical Standards under the revised Markets in Financial Instruments Directive specifying the scope of the consolidated tape for non-equity products (i.e., bonds, structured finance products, emission allowances and derivatives).
Under MiFID II, consolidated tape providers will collect post-trade information published by trading venues and approved publication arrangements (APAs) and consolidate this into a continuous live data stream made available to the public, both for equity instruments and non-equity products. Given the additional complexity involved in providing a non-equity consolidated tape, the relevant MiFID II provisions for the non-equity tape will not enter into effect until September 3, 2019.
The draft RTS will amend the existing Delegated Regulation 2017/571 (previously RTS 13) on authorization, organizational requirements and the publication of transactions for data reporting services providers, which sets out the scope of the equity tape, by adding provisions:- permitting non-equity consolidated tape providers to specialize in one or more asset classes to increase the likelihood of a viable business case for non-equity consolidated tape provision; and
- specifying the APAs and trading venues that have to be included in the non-equity consolidated tape based on the required consolidated tape coverage ratio of 80% of all transactions published in an asset class in the EU.
View ESMA's press release.Topic : MiFID II -
Financial Conduct Authority Publishes Markets in Financial Instruments Directive II Implementation - Policy Statement I
03/31/2017
The Financial Conduct Authority has published its first Policy Statement on Markets in Financial Instruments Directive II Implementation. The Policy Statement sets out near final rules in the areas consulted on in previous consultation papers, covering, requirements for Regulated Markets, Multilateral Trading Facilities, Organised Trading Facilities, Systematic Internalisers, transparency, market data, algorithmic and high frequency trading requirements, passporting and branches of non-European Economic Area (EEA) firms, Principles for businesses, rules relating to commodity derivatives, supervision, prudential rules, systems and controls, including remuneration and whistleblowing and fees.
It also covers a small number of issues relating to the use of approved reporting mechanisms and the new authorisation category of data reporting service providers and an update on the FCA's proposals for recording of telephone conversations.
In June, the FCA plans to finalize the MiFID II rules in a further policy statement. This will cover remaining issues which include conduct of business, perimeter guidance and client asset protections.
The FCA stated that it does not intend to substantively amend the rules published in the Policy Statement prior to their entry into force. Firms impacted by the changes to the activities and instruments covered by MiFID II should now apply for authorization or for variations of permission, in order to continue being able to operate in the UK after January 3, 2018, when MiFID II takes effect.
View the Policy Statement and related webpage.Topic : MiFID II -
Financial Conduct Authority Publishes Markets in Financial Instruments Directive II Implementation - Consultation Paper V
03/31/2017
The Financial Conduct Authority has published its fifth Consultation Paper on the Markets in Financial Instruments Directive II Implementation. The consultation deals with changes to the FCA's decision procedure and penalties manual (DEPP) and the enforcement guide (EG), consequential and miscellaneous changes to the FCA Handbook and new guidance on the use of third parties where firms are required to provide financial instrument reference data or commodity derivative position reports to the FCA. It also sets out the FCA's proposals for new conduct rules dealing with the non-MiFID business of occupational pension scheme firms.
The proposals will affect a wide range of authorized firms, recognized bodies and unregulated entities trading commodity derivatives. In particular, it will be of interest to banks, investment firms, recognized investment exchanges, Multilateral Trading Facilities, prospective Data Reporting Service Providers and occupational pension scheme firms.
Comments on the proposals relating to DEPP, EG and consequential changes to the Handbook are due by May 12, 2017. The FCA intends to publish the final rules for these areas in its June policy statement. Comments on the proposed conduct rules for occupational pension scheme firms are due by June 23, 2017. The final rules for these areas will be published in a later policy statement.
View the Consultation Paper and related webpage.
View the online response form.Topic : MiFID II -
MiFID II Final Level II Legislation Published
03/31/2017
Level II legislation under the revised Markets in Financial Instruments Directive was published in the Official Journal of the European Union. The legislation published includes 26 Regulatory Technical Standards, two Commission Delegated Regulations and one Commission Delegated Directive. The legislation will enter into force on April 20, 2017.
The Official Journal publication is available here.Topic : MiFID II -
Use of Dealing Commission Remains a Top Priority for UK Financial Conduct Authority
03/03/2017
The Financial Conduct Authority published a statement on the use of dealing commission by investment management firms, including asset managers and wealth managers. The FCA conducted a review of firms' practices from 2012 and 2015 and found that the majority of firms are falling short of the FCA's rules and expectations on their use of dealing commission. Some firms have made improvements and the result has been a reduction in dealing commission spent on research and better investment performance for their consumers. The FCA intends to continue focusing on the use of dealing commission, in particular during the implementation of MiFID II which applies from January 3, 2018. Where the FCA identifies a breach of the requirements, it will take appropriate action, including referring firms, individuals or practices for further investigation.
View the FCA's statement.Topic : MiFID II -
Best Execution Concerns Reiterated by the UK Financial Conduct Authority
03/03/2017
The Financial Conduct Authority published a statement on best execution compliance by investment firms. The statement sets out the FCA's findings from supervisory work on how investment managers deliver best execution for their clients. Best execution refers to the requirement on firms to obtain the best possible result for their clients when executing client orders. The FCA has found that many firms have not conducted a robust gap analysis since 2014 and have not addressed the issues highlighted in the FCA's thematic review on best execution and payment order flows (published in 2014). The FCA stated that it expects firms to take into account the findings in its thematic review as well as the asset management market study. The FCA intends to reconsider best execution in 2017 and will assess the steps that firms have taken to address gaps in achieving compliance with best execution requirements and how firms are intending to show that funds and client portfolios are not paying too much for execution. The FCA will consider taking further action against firms and/or individuals where best execution obligations are not being fulfilled.
In January 2017, the European Securities and Markets Authority stressed the importance of continued efforts to reach a high level of supervision with regards to best execution requirements, and urged national regulators to make every effort to ensure that firms would be compliant with the revised best execution requirements under MiFID II. MiFID II applies from January 3, 2018.
View the FCA's announcement.
View the FCA's thematic review on best execution and payment order flows.
View the FCA's asset management market study.
View ESMA's follow-up report.Topic : MiFID II -
Final Draft EU Technical Standards on Pre-trade Transparency Requirements for Package Orders Published
02/28/2017
The European Securities and Markets Authority has published a final report and final draft Regulatory Technical Standards on pre-trade transparency rules for package orders under the Markets in Financial Instruments Regulation. Package transactions are transactions executed by investment firms, either on their own account or on behalf of clients, which are made up of a number of interlinked, contingent components. Their aim is to reduce transaction costs and assist in risk management. The legislation delaying the implementation of the MiFID II package also revised MiFIR to specifically require public disclosure of bid and offer prices for package orders. Definitions for package orders and package transactions were also added. National regulators are able to waive the obligation for package orders which meet certain conditions, such as where the package order includes a financial instrument for which there is no liquid market (unless there is a liquid market for the package order as a whole).
Read more.Topic : MiFID II -
UK Definition of "Financial Advice" Set to Change from 2018
02/27/2017
HM Treasury published its response to its late 2016 consultation on amending the definition of regulated advice under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to bring it in line with the definition of "investment advice" set out in the Markets in Financial Instruments Directive. HMT is proceeding with the change as consulted on and will lay draft legislation before Parliament to give effect to the change. The Financial Conduct Authority published a statement about the change, setting out what the change will mean for firms advising on investments or providing a personal recommendation.
Read more. -
European Securities and Markets Authority Concerned About MiFID II Loopholes
02/14/2017
The European Securities and Markets Authority published a letter, dated February 1, 2017, from it to the European Commission about the potential for loopholes to be exploited in the revised Markets in Financial Instruments package, known as MiFID II. MiFID II comes into effect on January 3, 2018. Part of the aim of MiFID II is to close some of the loopholes that were identified in the existing MiFID I legislation, including by ensuring that investment firms that operate internal matching systems and execute client orders on a multilateral basis become authorized as a trading venue. ESMA expresses the concern that certain investment firms that currently operate broker-crossing networks might seek to circumvent the provisions of MiFID II by setting up networks of interconnected systematic internalisers. ESMA commits itself to monitoring developments closely and states that it may consider clarifying the scope of the permitted activities of SIs as well as the characteristics of multilateral systems via Q&As. ESMA requests the Commission to consider whether it should adopt any legislation that might further clarify the definitions and concepts in MiFID II to prevent the loophole being exploited.
View the letter.Topic : MiFID II -
UK Government Publishes Final Policy on Transposing MiFID II
02/09/2017
HM Treasury published a paper summarizing responses to its consultation on the transposition of the revised Markets in Financial Instruments Directive and three draft statutory instruments to facilitate transposition. Member States are required to adopt measures transposing MiFID II by July 3, 2017 and to apply the provisions from January 3, 2018. HM Treasury consulted on MiFID II transposition in March 2015 and sought feedback on draft legislation to facilitate transposition and its proposed policy approach to access for third country firms, data reporting services, position limits and reporting, unauthorised persons, structured deposits, the power to remove board members, organised trading facilities and binary options. Most respondents broadly agreed with the proposed measures for transposition. However, further guidance has been provided on numerous aspects of the proposed legislation. Since the consultation, a number of further issues in MiFID II requiring further legislative amendments as part of transposition have been identified and are included in the draft legislation and detailed in the report. HM Treasury notes that despite the UK voting to leave the EU, until exit negotiations are concluded, the UK remains a full member of the EU and must comply with MiFID II accordingly.
Topic : MiFID II -
Revised EU Commodity Derivatives Position Reporting Standards Published
02/09/2017
The European Securities and Markets Authority published revised final draft Implementing Technical Standards on the format of position reports by market operators and investment firms. The revised Markets in Financial Instruments Directive requires national regulators to establish and apply position limits on the size of a net position in commodity derivatives traded on trading venues and economically equivalent OTC contracts. The limits will apply to the size of a position that a person can hold, including any other positions held on behalf of that person by group entities. Market operators and investment firms will be subject to certain position reporting requirements. The position reporting regime is intended to support the application and enforcement of position limits.
ESMA has revised the ITS that it submitted to the European Commission for endorsement in December 2015 because of difficulties experienced in implementing the original ITS in practice. Among other things, the revised ITS remove the obligation for positions to be reported gross. ESMA has submitted the revised ITS to the European Commission for endorsement. The MiFID II package will apply from January 3, 2018.
View the revised ITS.
Topic : MiFID II -
UK Financial Conduct Authority Publishes Guide on Applications and Notifications for MiFID II
01/13/2017
The Financial Conduct Authority published a guide on applications and notifications under the Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation, together the MiFID II package. MiFID II will apply from January 3, 2018. It will introduce, among other things, new processes and forms for authorizing investment firms and new activities, such as operating an Organised Trading Facility. It will also require notifications to be made to the FCA. The FCA's guide covers applications for investment firm authorizations, new data reporting service providers authorizations, recognition of investment exchanges and variation permission as well as the notifications required by authorized firms and exchanges, including passporting notifications.
In particular, investment firms should note that the FCA will be using new forms for authorizations and variation of permission for investment services and activities from January 30, 2017, and the new passporting notifications from July 31, 2017. All applications for authorization of investment firms and DRSPs or variation of permission must be submitted by July 3, 2017 to allow the FCA time to assess the applications before the MiFID II implementation date. Passporting notifications must be submitted by December 2, 2017 so that the FCA can send them to other EU regulators before January 3, 2018.
The information in the guide is currently up to date. The FCA intends to provide updates on processes for applications and notifications, where necessary, through its website.
View the guide.
Topic : MiFID II -
European Securities and Markets Authority Opines on the Scope of Product Intervention Powers
01/12/2017
The European Securities and Market Authority published an Opinion on the scope of the product intervention powers under the Markets in Financial Instruments Regulation. The Opinion focuses on the impact of the exclusion for fund managers from the scope of the MiFIR intervention powers. MiFIR gives national regulators the power to temporarily prohibit or restrict the marketing, distribution or sale of certain financial instruments (such as units or shares in Undertakings in Collective Investment in Transferable Securities or Alternative Investment Funds) in the EU by investment firms and banks, whether the UCITS or AIF is internally or externally managed, or financial instruments with certain specified features or a type of financial activity or practice. The intervention power only applies to banks authorized under the Capital Requirements Directive and to investment firms authorized under the revised Markets in Financial Instruments Directive (known as "MiFID Firms"), when providing investment services and/or performing investment activities and to market operators including any trading venues they operate. The intervention powers will apply from January 3, 2018, in accordance with the application date of MiFIR.
Read more. -
European Securities and Markets Authority Follows Up on Supervision by National Regulators of Best Execution Requirements
01/11/2017
The European Securities and Markets Authority published a follow-up report to the 2015 peer review on best execution. The Markets in Financial Instrument Directive requires investment firms to provide best execution for their clients when executing their clients' orders. ESMA conducted a peer review on how national regulators supervised and enforced the requirements in 2011 and 2012 and published the results in February 2015, recommending, amongst other things: (i) prioritization of best execution by national regulators; (ii) the allocation of supervisory resources; and (iii) the adoption of a proactive approach to monitoring compliance with best execution requirements, including through onsite inspections. In 2016, ESMA began to assess whether national regulators had taken steps to address the shortcomings identified in the peer review. The 2017 report shows that national regulators are being more proactive in their supervision of best execution. However, there are still some deficiencies that need to be addressed as some national regulators were not able to show progress in relationship to deficiencies previously identified. ESMA's view is that regular and proactive supervision and monitoring of compliance with the best execution requirements is the only way to ensure investor protection in this area. Firms will continue to be subject to best execution requirements when the MiFID II package comes into effect on January 3, 2018 and ESMA urges national regulators to act to ensure that there is compliance with best execution requirements by investment firms.
View ESMA's 2017 follow-up report.
View the 2015 peer review report.Topic : MiFID II -
UK Financial Conduct Authority Publishes Fourth Consultation on Implementing MiFID II
12/16/2016
The Financial Conduct Authority published its fourth consultation paper on the implementation of the revised Markets in Financial Instruments Directive in the UK. MiFID II regulates retail and wholesale investment business. The consultation covers technical matters that were outside the scope of previous consultations and includes proposed changes to the FCA Handbook on specialist regimes, tied agents, market data, SME growth markets and transitional fees.
The FCA is proposing to update section 18 of the Conduct of Business sourcebook of the Handbook by updating cross-references to correspond to the FCA's proposed changes to other sections of COBS. COBS 18 contains a number of tailored conduct regimes covering both MiFID and non-MiFID business, for specialist types of designated investment business.
The FCA is proposing amendments to Handbook rules on appointed representatives to reflect the technical changes in MiFID II and the tied agents regime. The proposals are particularly relevant to firms undertaking MiFID or equivalent third country business. Under MiFID II, all Member States will be required to maintain tied agents regimes, whereas they currently have an option as to whether to do so. As a result, the FCA is seeking to clarify the territorial application of the appointed representative rules. MiFID II also changes the scope of permitted activities relating to structured products for tied agents and the FCA is proposing to introduce new definitions of “MiFID optional exemption AR” and “structured deposit AR”. The new terms will define the new populations of authorised representatives to which MiFID tied agent requirements will also apply.
Read more.Topic : MiFID II -
FICC Markets Standards Board Final Guidelines on Surveillance and Training in Wholesale Markets
12/08/2016
The Fixed Income, Currency and Commodities Markets Standard Board published guidelines on surveillance and training in wholesale markets. The guidance is outlined in the FMSB's Statement of Good Practice for Surveillance in Foreign Exchange Markets and Statement of Good Practice for Conduct Training. The Statement of Good Practice for Surveillance highlights the FMSB's Core Principles that firms should consider in advance of designing and implementing their surveillance measures in the foreign exchange markets, such as ensuring that: (i) the surveillance function is independent of front office; (ii) there are effective governance controls; and (iii) there is a regular review of surveillance systems to ensure that they are fit for purpose given the element of constant change in risk. It also identifies emerging practices to combat the risk of insider dealing and market manipulation, including the use of automated voice surveillance systems using techniques such as Natural Language Processing.
Read more. -
UK Regulator Proposals to Amend the Conduct of Business Rules for Retail CfDs
12/06/2016
The Financial Conduct Authority published a consultation paper setting out its proposals to enhance the conduct of business rules for firms providing contract for difference products to retail clients and to limit the risks of CfDs for retail clients. The FCA is proposing to change its current rules because of increasing evidence of poor conduct by relevant firms and risks posed to retail customers. Amongst other things, the FCA is proposing to require all CfD firms to provide a standardized risk warning and mandatory profit-loss disclosures, to impose lower leverage limits for inexperienced retail clients (i.e. those with less than 12 months of active trading experience) and higher leverage limits for experienced retail clients, and to prohibit bonus and account opening promotions for their retail CfD products and platforms.
The FCA also sets out its policy proposals for the regulation of binary bets. Binary bets are expected to be brought within the UK regulatory perimeter as part of the UK implementation of the revised Markets in Financial Instruments Directive. The FCA is considering its policy approach for the protection of retail clients in relation to binary bets and is seeking feedback on its approach before it consults on formal proposals.
The consultation closes on March 7, 2017. The FCA expects to publish a Policy Statement and final rules in Q2 2017, with the expectation that the rules will come into force shortly afterwards.
View the consultation paper. -
European Commission Adopts Technical Standards on Criteria for the Ancillary Activity Exemption
12/01/2016
The Commission adopted Regulatory Technical Standards supplementing the revised Markets in Financial Instruments Directive, setting out when an activity is “ancillary” to a firm’s main business. MiFID II provides an exemption from the requirement for authorization as an investment firm when dealing on own account, or providing investment services to clients in commodity derivatives, emission allowances or derivatives thereof, provided that the activity is an ancillary activity to their main business on a group basis and the main business is not the provision of investment services within the meaning of MiFID II or banking activities under the Capital Requirements Directive. Adoption of the RTS follows the consultation by the European Securities and Markets Authority on the draft RTS. The Commission proposed changes to ESMA's final draft RTS, which was submitted on September 28, 2015, including a capital test to distinguish a group’s main activates from its ancillary activities. The Commission requested a methodology to specify the allocation of capital between the main business activity and the ancillary activity to enable groups to demonstrate, based on the capital employed, where the group’s main business activity resides. On May 30, 2016, ESMA responded by way of formal opinion and revised draft RTS. Rather than a single capital based methodology, ESMA proposed five options for speculative trading and three for a group’s main activity. ESMA did not stipulate which of the options was to be preferred and did not specify a threshold for determining the percentage of speculative trading by a group‘s main activity that would trigger the requirement for authorization under MiFID II.
Read more.Topic : MiFID II -
UK Prudential Regulation Authority Issues Second Consultation Paper on Implementing MiFID II
11/25/2016
The Prudential Regulation Authority launched its second consultation on implementing certain aspects of the Markets in Financial Instruments legislative package, which comprises the Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation, collectively known as MiFID II. The consultation relates to requirements for a firm's management body and organizational requirements as well as to the new regulated activity of operating an Organised Trading Facility and the new financial instrument of "emission allowances" and structured products. The PRA consulted on its approach to passporting and algorithmic trading earlier in 2016 and has published its final rules for those areas. The PRA will consult on other aspects related to MiFID II in due course.
Read more.Topic : MiFID II -
Final EU Secondary Legislation on Third-Country Firms' Applications for the Provision of Investment Services Published
11/19/2016
Regulatory Technical Standards on the required information for registration of third country firms and the format of information provided to clients was published in the Official Journal of the European Union. The RTS supplement the Markets in Financial Instruments Regulation on the provision of services and performance of activities by third country firms following an equivalence decision with or without a branch. The RTS specifies the information necessary for registration with the European Securities and Markets Authority. The RTS requires firms to update ESMA, within 30 days, of any changes to the information provided in its application. MiFIR requires third country firms, before providing investment services for clients in the EU, to inform such clients that they are not permitted to perform services for clients other than eligible counterparties and professional clients within the definition of the revised Markets in Financial Instruments Directive and, furthermore, that they are not subject to supervision in the EU. The RTS provides that the notice must be provided in a “durable medium” (which includes electronic media); such that, amongst other things, it is in English or the in the official language, or one of the official languages, of the Member State where the services are to be provided.
View the RTS on application by third country firms for permission to provide investment services.Topic : MiFID II -
Final EU Secondary Legislation on Access to Benchmarks Published
11/19/2016
Regulatory Technical Standards on access in respect of benchmarks was published in the Official Journal of the European Union. The RTS supplement the Markets in Financial Instruments Regulation. MiFIR provides for non-discriminatory access to benchmarks for the purposes of clearing and trading for central counterparties and trading venues. This includes access to the licenses of, and information relating to, benchmarks which are used to determine the value of some financial instruments for trading and clearing purposes. The RTS specifies that a person with proprietary rights to a benchmark must, upon request, make available to CCPs and trading venues the information necessary to perform their clearing or trading functions. For CCPs, the functions include the appropriate risk management of relevant open positions in exchange-traded derivatives, including netting, and compliance by the CCP with its obligations under the European Market Infrastructure Regulation. For trading venues, such functions include the initial assessment of the characteristics of the benchmark, the marketing of the relevant product and the support of the price formation process for the contracts admitted or being admitted to trading. The RTS state that the provision of price and data feeds must include the feed of the benchmark’s values and the prompt notification of any inaccuracy in the calculation of the benchmark values and of the updated or corrected benchmark values. The RTS also sets out general conditions on the provision of information through licensing and the minimum conditions that a benchmark owner must set for licensing agreements.
Read more.Topic : MiFID II -
UK Regulator Publishes Interim Report on Asset Management Market Study
11/18/2016
The Financial Conduct Authority published an interim report following its Asset Management Market Study. As per The Terms of Reference, the FCA investigated three core areas: (i) how asset managers compete to deliver value; (ii) whether asset managers are willing and able to control costs and quality along the value chain; and (iii) how investment consultants affect competition for institutional asset management. The FCA also looked at whether there are any barriers to innovation that prevent investors from obtaining better results.
The FCA found that, based on the evidence produced, a weak price competition exists in a number of areas of the asset management industry. The lack of competition has a material impact on the investment returns of investments as a consequence of their payments for asset management services. The FCA reviewed product development and innovation in the asset management market and concluded that there is some evidence of innovation and limited evidence of any significant structural or regulatory barriers to entry. The FCA is of the view that despite the interim finding raising concerns about how effectively competition drives value for investors in the asset management sector, there are also some competitive pressures building in parts of the market and this is likely to continue.
Read more. -
Proposed EU Technical Standards on Pre-trade Transparency Requirements for Package Orders
11/10/2016
The European Securities and Markets Authority launched a consultation on pre-trade transparency rules for package orders under the Markets in Financial Instruments Regulation. Package transactions are transactions executed by investment firms, either on their own account or on behalf of clients, which are made up of a number of interlinked, contingent components. Their aim is to reduce transaction costs and assist in risk management. When the legislation delaying the implementation of the MiFID II package was published, MiFIR was revised specifically to require public disclosure of bid and offer prices for package orders. Definitions for package orders and package transactions were also added. National regulators are able to waive the obligation for package orders which meet certain conditions, such as where the package order includes a financial instrument for which there is not a liquid market (unless there is a liquid market for the package order as a whole).
ESMA is required to prepare draft Regulatory Technical Standards by February 28, 2017, setting out the methodology for determining the package orders for which there is a liquid market. ESMA is required to assess whether packages are standardized and frequently traded in preparing the RTS.
ESMA's consultation paper considers the treatment of packages for transparency purposes, taking into account the pre-trade transparency regime for package orders in the EU and the US and sets out ESMA's proposed methodology for determining package orders for which there is a liquid market. The consultation closes on January 3, 2017. ESMA will finalize the draft RTS for submission to the European Commission by the end of February 2017.
View the consultation paper.Topic : MiFID II -
EU Consultation on Assessing the Suitability of Management
10/28/2016
The European Banking Authority and the European Securities and Markets Authority launched a joint consultation on proposed Guidelines on the Assessment of the Suitability of the Members of Management Body and Key Function Holders. The revised Markets in Financial Instruments Directive and the Capital Requirements Directive require firms to assess the suitability of members of their management body. Firms subject to CRD must all assess the suitability of all key function holders that have a significant influence over the direction of the firm. The proposed Guidelines provide criteria for assessing the individual and collective knowledge, skills, experience, reputation, honesty, integrity and independence of members of the management body. The proposed Guidelines also include a framework for assessing whether individual members of management commit sufficient time to performing their duties, set out how diversity should be taken into account in the selection process for members of the management body and provide for appropriate financial and human resources to be allocated to induction and training.
View the consultation paper. -
UK Prudential Regulation Authority Confirms Rules on Passporting and Algorithmic Trading under MiFID II
10/27/2016
The Prudential Regulation Authority published its final rules for transposing passporting and algorithmic trading aspects of the Markets in Financial Instruments legislative package, which comprises the Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation, collectively known as MiFID II. The PRA also published its responses to the feedback it received on its proposed rules which were included in the consultation paper published on March 24, 2016.
Read more.Topic : MiFID II -
EU Reporting Instructions Released
10/26/2016
The European Securities and Markets Authority issued detailed reporting instructions and XML schema under its Financial Instruments Reference Data System. FIRDS covers the requirements under both the Markets in Financial Instruments Regulation and the Market Abuse Regulation for reference data collection, transparency reporting obligations, submission of the Double Volume Cap data and the transaction exchange reporting mechanism.
View ESMA's announcement. -
Final EU Guidelines on Transaction Reporting, Order Record Keeping and Clock Synchronization Published
10/10/2016
The European Securities and Markets Authority published a Final Report providing its responses to the feedback on the proposed Guidelines on transaction reporting, order record keeping and clock synchronization under the MiFID II package. The final Guidelines were also published. The MiFID II package, which comprises the Markets in Financial Instruments Regulation and the revised Markets in Financial Instruments Directive as well as the related technical standards, imposes transaction reporting and order record keeping obligations on investment firms, approved reporting mechanisms, trading venues and systematic internalizers. The Guidelines focus on the preparation of transaction reports and order data records for various scenarios and aim to harmonize across Member States the approach to compliance with the MiFID II requirements. The Guidelines also include examples for reporting specific financial instruments with a focus on derivatives and provide further clarification on specific legislative provisions in the MiFID II package, on terms such as “reportable events” and “gateway-to-gateway latency”. The Guidelines will apply from January 3, 2018 in line with the application date of the MiFID II package.
View ESMA's Final Report and final Guidelines.
Topic : MiFID II -
European Securities and Markets Authority Consults on Proposed Guidelines on Trading Halts under MiFID II
10/06/2016
The European Securities and Markets Authority published draft Guidelines on trading halts by regulated markets under the revised Markets in Financial Instruments Directive. MiFID II requires regulated markets to temporarily halt or constrain trading if there is a significant price movement in a financial instrument (equity, equity-like and debt instruments) on that market or a related market in a short period. Regulated markets must also, in exceptional cases, cancel, vary or correct any transaction. ESMA is required to develop Guidelines on the calibration of those trading halts, taking into account the liquidity of the different asset classes and sub-classes, the nature of the market model and types of users. ESMA is also proposing Guidelines, at its own initiative, which set out how trading halts should be communicated to market participants and other venues and on the procedure and format of submissions by regulated markets to national regulators setting out the parameters for halting trading. The Guidelines will apply to national regulators, trading venues (regulated markets, MTFs and OTFs) and all trading systems allowing or enabling algorithmic trading. The consultation closes on December 6, 2016. ESMA intends to finalize the Guidelines in Q1 2017.
View the consultation paper.Topic : MiFID II -
European Securities and Markets Authority Consults on Proposed Guidelines on Product Governance Requirements under MiFID II
10/05/2016
The European Securities and Markets Authority published draft Guidelines on the target market assessment for the new product governance requirements in the revised Markets in Financial Instruments Directive. The product governance requirements require firms which manufacture and distribute financial instruments and structured deposits to act in their clients’ best interests during all the stages of the life-cycle of products or services. The requirements in MiFID II were further specified in secondary legislation which was adopted by the European Commission in April 2016. ESMA's proposed Guidelines focus on the ‘target market assessment’, which has been identified as the most important for achieving consistent application of the product governance requirements across the EU.
The proposed Guidelines set out, amongst other things, the determination of the potential target market by the manufacturer or distributor in terms of categories to be considered and differentiation on the basis of the nature of the product manufactured or distributed, regular reviews to assess whether products and services are reaching the target market and the distribution of products manufactured by entities not subject to the MiFID II product governance requirements by MiFID II distributor firms. ESMA has also included practical examples and case studies on the application of certain aspects of the proposed Guidelines. The consultation closes on January 5, 2017. ESMA will consider the feedback it receives and intends to publish a final report in Q1 or Q2 2017.
View the consultation paper.
Topic : MiFID II -
European Securities and Markets Authority Consults on Draft Guidelines for Management of Exchanges and Data Reporting Service Providers
10/05/2016
The European Securities and Markets Authoritypublished draft Guidelines on the requirements for the management body of market operators and Data Reporting Services Providers respectively. The revised Markets in Financial Instruments Directive requires all members of the management body of any market operator to be of sufficiently good repute, possess sufficient knowledge, skills and experience to perform their duties, to commit sufficient time to perform their functions and to act with honesty, integrity and independence of mind. Market operators must also promote diversity and allocate adequate human and financial resources to the induction and training of the management body. Similar requirements are placed on the management body of DRSPs but DRSPs are not required to promote diversity and allocate adequate human and financial resources to the induction and training of the management body.
The proposed Guidelines will apply to the management body of market operators which are the individuals who operate a regulated exchange and to DRSPs. Investment firms operating a multilateral trading facility, an organized trading facility or banks operating a trading venue will not be subject to the proposed Guidelines. Instead the management bodies of operators of these other types of trading venues will be subject to separate Guidelines developed under other provisions of MiFID II and the Capital Requirements Directive which ESMA and the European Banking Authority are expected to consult on soon. The consultation closes on January 5, 2017. ESMA will consider the feedback it receives and intends to publish a final report in Q1 or Q2 2017.
View the consultation paper.Topic : MiFID II -
European Securities and Markets Authority Publishes Draft Regulatory Technical Standards on Consolidated Tape for Non-Equity Financial Instruments
10/03/2016
The European Securities and Markets Authority published a consultation paper containing draft Regulatory Technical Standards specifying the scope of the consolidated tape for non-equity financial instruments under the Markets in Financial Instruments Directive II. The RTS on the scope of tape for equity instruments was previously endorsed by the European Commission on June 2, 2016. ESMA's proposed draft RTS will amend the endorsed RTS on the equity consolidated tape by adding a list of non-equity asset classes that are to be included in the CTP electronic data stream. The list includes classes of bonds (excluding exchange traded commodities and notes), structured finance products, securitized derivatives, interest derivatives, foreign exchange derivatives, contracts for differences and emission allowances.
Read more.Topic : MiFID II -
UK Financial Conduct Authority Consults Further on Implementation of MiFID II
09/29/2016
The Financial Conduct Authority launched its third consultation on the implementation of the revised Markets in Financial Instruments Directive in the UK. The consultation paper is split into two parts. The first part is on conduct of business requirements and covers topics such as inducements, research, client categorization, disclosure requirements, independence, dealing and managing, suitability, appropriateness and investment research. The second part covers a range of issues such as product governance, supervision and authorization, knowledge and competence requirements and perimeter guidance.
The FCA's conduct of business proposals follow on from its Discussion Paper published last year which covered two general issues: whether the MiFID II conduct rules should apply to insurance-based investments and pensions and whether the MiFID II rules applicable to the activities of advising on or selling structured products should be incorporated into the FCA's Conduct of Business sourcebook. On the first issue, the FCA has decided to wait until EU implementing measures under the Insurance Distribution Directive are finalized before it sets out its proposals. The FCA is intending to consult on implementing the IDD in 2017. On the second issue, the FCA has decided to proceed with incorporating such MiFID II rules into the Conduct of Business sourcebook. The FCA is proposing to apply individual conduct rules to those activities, which is in line with the provisions in MiFID II.
Read more.Topic : MiFID II -
European Securities and Markets Authority Publishes Initial Proposals on the Trading Obligation under MiFIR
09/20/2016
The European Securities and Markets Authority published a discussion paper on the trading obligation for derivatives under the Markets in Financial Instruments Regulation. The trading obligation is applicable to classes of derivatives that: (i) have been declared subject to the clearing obligation under the European Market Infrastructure Regulation, (ii) are admitted to trading on at least one trading venue (a regulated market, multilateral trading facility, organized trading facility or a third country equivalent trading venue) and (iii) are sufficiently liquid. ESMA is required to prepare Regulatory Technical Standards setting out which derivatives (or a subset of derivatives) that have been declared subject to the clearing obligation (currently comprising only certain interest rate swaps and credit default swaps) will also be subject to the trading obligation and the date on which the obligation will take effect. ESMA is seeking feedback on its approach to implementing the trading obligation for derivatives, including its application to certain types of counterparties and the possibility of the obligation being phased in, and on its initial assessment of some classes of derivatives that might become subject to the obligation. The discussion paper also sets out how the trading obligation has been implemented in other jurisdictions, such as the US, Japan, Switzerland, Mexico, Argentina and China.
Read more.Topic : MiFID II -
HM Treasury Consults on Definition of Financial Advice
09/20/2016
HM Treasury published a consultation paper on amending the definition of regulated advice under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to bring it in line with the definition of “investment advice” set out in the Markets in Financial Instruments Directive. The consultation follows the Financial Advice Market Review, conducted by HM Treasury and the Financial Conduct Authority last year, which assessed how consumers could access advice on their finances more easily. The FAMR recommended that the government should consult on amending the definition of regulated advice in accordance with the MiFID definition, to the effect that only advice which makes a personal recommendation would be regulated. The consultation proposes a revised definition and seeks feedback on the costs and benefits of this change and any potential risks by November 15, 2016.
View the consultation page.
Topic : MiFID II -
UK Regulator Publishes Second Consultation Paper on Implementation of MiFID II
07/29/2016
The Financial Conduct Authority published a second consultation paper on implementation of the Markets in Financial Instruments Directive II and the associated proposed changes to the FCA Handbook. The first consultation paper, published on December 15, 2015, related to issues associated with the FCA’s regulation of the secondary trading of financial instruments. The proposals in the second consultation paper are relevant to many different firms, including investment banks, inter-dealer brokers, stockbrokers, investment advisers, corporate finance firms, trading venues, investment managers and prospective Data Reporting Services Providers. The Consultation Paper includes full implementation of relevant parts of MiFID II, consistent with FCA pronouncements that roll-out of MiFID II will not be affected by the Brexit vote.
Read more.Topic : MiFID II -
European Commission Adopts Technical Standards Detailing the Reporting of Transactions Obligations under MiFIR
07/28/2016
The European Commission adopted a Commission Delegated Regulation in the form of Regulatory Technical Standards supplementing the Markets in Financial Instruments Regulation. MiFIR will, from January 3, 2018, require an investment firm to report complete and accurate details of transactions in financial instruments no later than the close of the following business day to its national regulator. One of the purposes of the reporting obligation is for national regulators to undertake market surveillance, including to monitor for market abuse.
Read more.Topic : MiFID II -
European Commission Adopts Technical Standards on Organisational Requirements for Investment Firms Engaged in Algorithmic Trading
07/19/2016
The European Commission adopted a Commission Delegated Regulation in the form of Regulatory Technical Standards specifying the organisational requirements of investment firms engaged in algorithmic trading. The adopted RTS supplement the revised Markets in Financial Instruments Directive (MiFID II) by specifying the systems, procedures, arrangements and controls to be put in place and maintained by investment firms to address the risks that may arise in financial markets due to the increased use and development of trading technology. The adopted RTS also outlines requirements of systems and controls for investment firms acting as general clearing members (those not involved with algorithmic trading).
Read more.Topic : MiFID II -
Amendments to Transaction Reporting under the Markets in Financial Instruments Regulation Proposed
07/01/2016
The European Securities and Markets Authority submitted two amendments to the European Commission on the final draft regulatory technical standards on transaction reporting obligations under the Markets in Financial Instruments Regulation. The draft RTS were first submitted on September 25, 2015. The final draft RTS outlines transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other financial instruments such as bonds and derivatives.
Read more.Topic : MiFID II -
FICC Markets Standards Board Proposes Reference Price Transactions Standard
06/30/2016
The FICC Markets Standards Board published a draft standard for Reference Price Transactions for the fixed income markets. This is the first standard that the FMSB has published since it was established in June 2015 in response to the Fair and Effective Markets Review conducted by the HM Treasury, the Bank of England and the Financial Conduct Authority. The FMSB’s objective is to improve conduct in the wholesale Fixed Income, Currency and Commodities markets. Feedback on the proposed standard was due by September 8, 2016. The standards serve as a supplement to applicable law, rules and regulation and seek to deal with traders’ conflicts of interests where hedging entered into by the liquidity provider could influence the reference price transaction. Once finalized, the standard will apply to all FMSB member firms (just over 30 firms to date) on a global basis.
View the proposed standard.Topic : MiFID II -
MiFID II Implementation Delayed to 2018
06/30/2016
EU legislation postponing the implementation date of the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation was published in the Official Journal of the European Union. The MiFID II package will now formally not apply until January 3, 2018 instead of 2017. The postponement includes all of the technical standards and national laws although member states will need to transpose the requirements into national laws by July 3, 2017. In addition to the provisions delaying the implementation date, certain substantive amendments have also been made to the original texts of MiFID II. For example, Securities Financing Transactions, as defined in the new Securities Financing Transactions Regulation, will be excluded from the pre- and post-trade transparency obligations under MiFID II and there are revisions to specifically require the public disclosure of bid and offer prices for package orders.
Read more.Topic : MiFID II -
European Securities and Markets Authority Updates Its Waivers for Pre-Trade Transparency Requirements under MiFID I
06/20/2016
The European Securities and Markets Authority published an updated document on its approach to waivers to certain pre-trade transparency requirements under the current Markets in Financial Instruments Directive. MiFID I allows national regulators to grant waivers to regulated markets and multilateral trading facilities from certain pre-trade transparency requirements for shares based on the market model or the type and size of orders. ESMA first published the document in August 2015, setting out examples of pre-trade waivers under MiFID I. The document is intended to assist national regulators in ensuring that their supervisory practices are in line with ESMA’s opinions and to assist firms by clarifying the content of the MiFID I requirements.
View ESMA's document.Topic : MiFID II -
European Commission Adopts Regulatory Technical Standards on the Direct, Substantial, and Foreseeable Effect of Derivative Contracts within the European Union
06/13/2016
The European Commission adopted a Commission Delegated Regulation supplementing the Markets in Financial Instruments Regulation. Under MiFIR, a new trading obligation is introduced for shares and other sufficiently liquid instruments. Such instruments must be traded on EU regulated exchanges or trading platforms or third country recognized exchanges and trading platforms. The trading obligation applies generally to third country entities that would be subject to the clearing obligation under EMIR if they were established in the Union. The trading obligation will apply to derivatives transactions pertaining to a class of derivatives that has been declared subject to the trading obligation, provided that the contract has a direct, substantial and foreseeable effect within the Union or where such obligation is necessary or appropriate to prevent the evasion of any provision of this Regulation. The adopted Regulation sets out the regulatory technical standards on the direct, substantial and foreseeable effect of derivative contracts within the European Union and the prevention of the evasion of rules and obligations, and therefore establishes when third country counterparties would be subject to the trading obligation mandated by MiFIR.Topic : MiFID II -
European Parliament Supports MiFID II Implementation Extension
06/08/2016
The European Parliament adopted at first reading the European Commission’s proposals for a new Directive and Regulation to extend the implementation of MiFID II by one year to January 3, 2018. In addition, the provisional text of the Directive adopted by the European Parliament clarifies the exemption for persons dealing on own account with respect to market makers. An expanded exemption would apply for direct electronic access and own account dealing activities, when this is done for hedging or treasury management purposes. The provisional text of the Regulation adopted by the European Parliament excludes securities financing transactions from transparency requirements for trading venues, systematic internalisers and investment firms trading OTC, specifies the circumstances in which pre-trade transparency requirements do not apply to certain package transactions and amends the Market Abuse Regulation and the Central Securities Depositories Regulation. The proposed Directive and Regulation will now be put forward to European Council under the normal legislative procedure.
View the provisional text of the Directive.
Topic : MiFID II -
EU Technical Standards on Data to be Published by Execution Venues on Execution Standards Adopted by the European Commission
06/08/2016
A Commission Delegated Regulation supplementing the Markets in Financial Instruments Directive with regard to regulatory technical standards concerning the data to be published by execution venues on the quality of execution of transactions was adopted by the European Commission. MiFID II requires that, for financial instruments subject to the trading obligation, each trading venue and systematic internaliser (and for other financial instruments, each execution venue) make data available to the public relating to the quality of execution of transactions on that venue on at least an annual basis. The adopted Regulation specifies the content, format and periodicity of data relating to quality of the execution to be published by execution venues.
Read more.Topic : MiFID II -
European Commission Adopts Technical Standards on Access to Information on Benchmarks under MiFID II
06/02/2016
The European Commission adopted a Delegated Regulation on RTS setting out the standards for non-discriminatory access for central counterparties and trading venues to licenses of, and information relating to, benchmarks. The Markets in Financial Instruments Regulation provides for such access so as to allow for the determination by a CCP or trading venue of the value of certain financial instruments for trading and clearing purposes. The adopted RTS provide the list of information to be provided by a benchmark owner to a trading venue or CCP requesting access. The information requested must be necessary for the CCP or trading venue to perform its clearing or trading function. The adopted RTS provide that, for trading venues, those functions are, at least: (i) an initial assessment of the characteristic of the benchmark, (ii) the marketing of the relevant product and (iii) the support of the price information process for contracts admitted or being admitted to trading. For CCPs, the relevant functions are (i) risk management of relevant open positions in exchange-traded derivatives, including netting, and (ii) compliance with the requirements under the European Market Infrastructure Regulation. The adopted RTS also set out the price and data feed information to be provided as well as the composition, methodology and pricing information required to allow a CCP or trading venue to understand how each benchmark value is created and the actual benchmark values.
Read more.Topic : MiFID II -
European Commission Adopts Technical Standards on Disaggregation of Pre- and Post-Trade Transparency Data under MiFID II
06/02/2016
The European Commission adopted a Delegated Regulation on RTS which set out the requirements for trading venues to provide pre- and post-trade transparency data. MiFIR requires data to be publicly available in an unbundled format. The adopted RTS set out the level of disaggregation by which trading venues should offer data - by asset class, by country of issue, by the currency in which the financial instrument is traded and whether the data comes from scheduled daily auctions or continuous trading. Market operators and investment firms operating a trading venue should also offer any combination of disaggregation on a reasonable commercial basis on request and may offer bundles of data. Where it is not possible to determine the asset class to which an instrument belongs unambiguously, market operators and investment firms operating a trading venue should determine which criteria the relevant financial instrument meets.
Topic : MiFID II -
European Commission Adopts Technical Standards on Requirements for Data Reporting Services Providers under MiFID II
06/02/2016
The European Commission adopted a Delegated Regulation on Regulatory Technical Standards on the authorization and organizational requirements for, and publication of transactions by, Data Reporting Services Providers. The revised Markets in Financial Instruments Directive will introduce requirements for DRSPs to be authorized and supervised for their data reporting services, including the operation of Approved Publication Arrangements, Consolidated Tapes and Approved Reporting Mechanisms. The adopted RTS set out the requirements for authorization and ongoing supervision of DRSPs, including the provision of information to be provided to a national regulator when a DRSP is applying for authorization under MiFID II and the organizational requirements covering, amongst others, conflicts of interest, outsourcing, business continuity, IT security and connectivity. The adopted RTS also provide for the publication arrangements that a DRSP must have in place relating to machine readability, scope of data to be provided, non-discrimination and non-duplication.Topic : MiFID II -
European Securities and Markets Authority Opines on MiFID II Ancillary Business Criteria
05/30/2016
The European Securities and Markets Authority published an Opinion specifying the criteria for establishing, under the revised Markets in Financial Instruments Directive, when the activity of a firm is to be considered “ancillary” to the main business of the firm at a group level. Under the current MiFID, eligible firms trading commodity derivatives can rely on exemptions, for ancillary activities, avoiding the need to become regulated as an investment firm. MiFID II narrows the ancillary activity exemption considerably. ESMA is required to develop RTS to specify the criteria which must be taken into account for the revised exemption. They have specified at least the following two elements: (i) the need for ancillary activities to constitute a minority of activities at a group level; and (ii) the size of their ancillary trading activity compared to the overall market trading activity in that asset class. ESMA submitted draft RTS to the Commission on September 28, 2015. On March 14, 2016, the Commission indicated its intention to endorse the draft RTS, subject to a number of changes. In particular, the Commission requested that ESMA include, when proportionate and appropriate, a capital-based test for groups that have undertaken significant capital investments, relative to their size, in the creation of infrastructure, transportation or production facilities or groups that undertake activities or investments which cannot be hedged in financial instruments. The Opinion published is in response to the Commission’s request.Topic : MiFID II -
European Commission Adopts Further Technical Standards Under MiFID II
05/26/2016
The European Commission adopted two Delegated Regulations with Regulatory Technical Standards which will supplement the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation. The first RTS, relevant to MiFIR, set out the criteria that the European Securities and Markets Authority must use to assess whether derivatives that have been declared subject to the clearing obligation (under the European Market Infrastructure Regulation) have sufficient third-party buying and selling interest to be considered sufficiently liquid for the trading obligation to apply. MiFIR will introduce a trading obligation, whereby standardized volumes of sufficiently liquid non-equity instruments must be traded on a regulated market, multilateral trading facility, organised trading facility or equivalent third country platform (and not OTC).
Read more.Topic : MiFID II -
Level Two Legislation Under MiFID II on Information to be Provided by MTFs and OTFs
05/26/2016
A Commission Implementing Regulation containing Implementing Technical Standards on the information to be provided to national regulators by investment firm and market operators of multilateral trading facilities and organized trading facilities was published in the Official Journal of the European Union. The ITS supplements the revised Markets in Financial Instruments Directive, setting out the information that the operator of a MTF or OTF will need to provide to its national regulator on the specific functionality of the trading system so that its national regulator can assess whether the system fits within the definition of an MTF or OTF and also assess compliance with the requirements under MIFID II for an MTF or OTF. The information to be provided includes, amongst other things, the asset classes of financial instruments traded on the platform, the rules and procedures that ensure non-discriminatory access to the platform, arrangements for market making and rules on suspension or removal from trading of a financial instrument. MTFs or OTFs will also need to notify their regulators of any material changes to the information previously submitted. The RTS also sets out the format for the provision of this information. An OTF is a new category of trading platform that the MiFID II Directive and Markets in Financial Instruments Regulation will introduce. The ITS will apply from the date that the MiFID II Directive applies from.
View the ITS.Topic : MiFID II -
EU Technical Standards on the Removal or Suspension of Financial Instruments from Trading
05/24/2016
A Commission Delegated Regulation outlining the Regulatory Technical Standards on when financial instruments should be removed or suspended from trading was adopted by the European Commission. The adopted RTS will supplement the revised Markets in Financial Instruments Directive, which requires a market operator of a regulated market, multilateral trading facility or organized trading platform to suspend or remove from trading financial instruments which no longer comply with the rules of the trading platform.
Read more.Topic : MiFID II -
EU Technical Standards on Admission of Financial Instruments to Trading
05/24/2016
A Commission Delegated Regulation outlining the Regulatory Technical Standards for the admission of financial instruments to trading on regulated markets was adopted by the European Commission. The adopted RTS will supplement the requirements set out in the Markets in Financial Instruments Directive which requires a regulated market to have clear and transparent rules regarding the admission of financial instruments to trading. Such rules must ensure that any instruments admitted to trading are capable of being traded in a fair, orderly and efficient manner (and in the case of transferable securities, are freely negotiable).
Topic : MiFID II -
EU Legislation Amends Technical Standards for Ratio of Unexecuted Orders to Transactions
05/18/2016
A Commission Delegated Regulation, outlining the Regulatory Technical Standards on ratios of unexecuted orders to transactions, was adopted by the European Commission. The adopted RTS will supplement the requirements set out in the Markets in Financial Instruments Directive on algorithmic trading for both investments firms and trading venues.
Read more.Topic : MiFID II -
European Securities and Markets Authority Proposes Amended MiFIR List of Reportable Transactions
05/04/2016
The European Securities and Markets Authority published a Final Report on the revised draft Regulatory Technical Standard on transaction reporting under the Markets in Financial Instruments Regulation. ESMA is proposing amendments to the final draft RTS submitted to the European Commission on September 28, 2015. ESMA’s final draft RTS included a non-definitive list of example transactions which would not attract the reporting obligation under MiFIR, but that list that was silent on acquisitions or disposals that were solely the result of a transfer of collateral. The amendment updates the list to include collateral transfers as a type of “transaction” that should not be reported under MiFID II. The definition of transaction in the RTS is based on the concepts of “acquisition” or “disposal” of a financial instrument. ESMA concluded that including transfers of collateral, as a reportable transaction, would lead to a significant increase in reported data that is not susceptible to market abuse which would serve only to burden the market. Details of collateral are already reported under EMIR and will be reported under the Securities Financing Transaction Regulation for some transactions. ESMA has submitted the Final Report to the Commission with the intention of having it taken into account in the context of the Commission’s endorsement of the final draft RTS.
View the update and final report.Topic : MiFID II -
European Securities and Markets Authority Proposes Amended MiFID II Standards on Non-Equity Transparency and Position Limits
05/02/2016
The European Securities and Markets Authority published two Opinions proposing amendments to two of its draft Regulatory Technical Standards under the Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation, together known as MiFID II. In September 2015, ESMA submitted the two final draft RTS to the European Commission for endorsement. In April 2016, the Commission requested ESMA to amend each of the final draft RTSs. ESMA’s opinions are in response to the Commission’s request.
Read more.Topic : MiFID II -
EU Technical Standards on Requirements for Investment Firms under MiFID II Adopted by the European Commission
04/25/2016
The European Commission adopted a Delegated Regulation supplementing the Markets in Financial Instruments Directive with regard to organizational requirements and operating conditions for investment firms. The adopted Delegated Regulation outlines specific organizational requirements for investment firms performing investment services and ancillary services. In particular, the adopted Delegated Regulation provides procedures for compliance, risk management, complaints handling, personal transactions, outsourcing and conflicts of interest as well as the additional organizational requirements for underwriting and placing services and the production and dissemination of investment research. The adopted Delegated Regulation outlines the operating conditions for investment firms. It also specifies the rules which an investment firm must comply when providing services or ancillary services to clients. For example, it requires information to be provided to clients and potential clients on the costs and charges associated with investment services and financial instruments. The adopted Delegated Regulation further specifies that information, which is to include an explanation of the risks arising from the insolvency of the issuer and related events, such as a bail in, must also be provided.Topic : MiFID II -
European Commission under MiFID II Requests Amendments to Draft Technical Standards
04/22/2016
The European Commission published three separate letters rejecting European Securities and Markets Authority draft technical standards and requesting amendments in accordance with the Markets in Financial Instruments Directive II. The first letter concerns draft regulatory technical standards on transparency requirements in respect of bonds, structured finance products, emission allowances and derivatives. The draft RTS submitted by ESMA lays down the criteria for whether bonds and structured finance products are considered to be liquid and further sets out the parameters and methods for the calculation of those thresholds above which waivers or deferrals may be granted. The Commission largely agreed with the approach taken by ESMA in drafting the standards, however, it stated that the definition of liquidity and the factors for determining the waiver threshold should be reviewed with a more cautious approach. The Commission concluded that it would not endorse the draft RTS until the approach to defining a liquid market for bonds is further aligned with the approach for all other non-equity instruments.
Topic : MiFID II -
Draft EU Rules on Investor Protection under MiFID II Adopted by the European Commission
04/07/2016
The European Commission adopted a Delegated Directive on aspects of the revised Markets in Financial Instruments Directive covering rules for the safeguarding of client financial instruments and funds, product governance requirements and inducements.
Read more.Topic : MiFID II -
European Securities and Markets Authority Reviews Approach to Supervision of Suitability Requirements under MiFID
04/07/2016
The European Securities and Markets Authority published a peer review report on compliance with the suitability requirements under the existing Markets in Financial Instruments Directive. The review assessed during the period January 1, 2013, to December 31, 2014 how national regulators approach supervision of firms to ensure compliance with the MiFID suitability requirements when investment advice is given to retail clients. The MiFID suitability requirements aim to ensure that firms only recommend suitable investment products to investors taking into account the client's profile. ESMA found, amongst other things, that only some regulators provide information on the tools they use to monitor compliance with the suitability requirements, many regulators do not undertake targeted supervision projects relating to suitability and enforcement action is rare as most regulators consider that their supervisory approach is sufficient to address any issues. ESMA will analyze the findings and determine areas where further convergence between the approaches taken by national regulators is needed.
View the review report.Topic : MiFID II -
UK Prudential Regulation Authority Consults on Implementing Aspects of MiFID II
03/24/2016
The Prudential Regulation Authority published its proposals for transposing certain aspects of the Markets in Financial Instruments legislative package, which comprises the Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation, collectively known as MiFID II. The PRA's proposals relate to the passporting regime and algorithmic trading only – the PRA will consult on other aspects related to MiFID II in due course.
View more.Topic : MiFID II -
EU Guidelines on Assessing Knowledge and Competence Under MIFID II
03/22/2016
The European Securities and Markets Authority published translations of its guidelines on the assessment of the knowledge and competence of individuals providing investment advice or information about financial instruments, investment services or ancillary services to clients on behalf of investment firms. Under the revised Markets in Financial Instruments Directive, an investment firm is required to ensure that individuals giving investment advice or providing information about financial instruments, investment services or ancillary services to clients have the necessary knowledge and competence to do so and satisfy the firm's obligations on suitability, appropriateness and reporting and provision of information to clients. Where requested by its national regulator, an investment firm may be requested to demonstrate that these requirements have been met. National regulators must publish the criteria that will be used to assess such knowledge and competence. ESMA's guidelines, which apply to national regulators and investment firms, specify criteria for the assessment of knowledge and competence, establishing the minimum standards that staff providing the relevant services should meet. The guidelines will come into effect on January 3, 2017.
Topic : MiFID II -
European Securities and Markets Authority Drafting an Opinion on Proposed Amendments to Technical Standards Under MiFID II
03/21/2016
The European Securities and Markets Authority published three letters from it to the European Commission concerning certain Regulatory Technical Standards under the revised Markets in Financial Instruments Directive and the Markets in Financial Instruments Regulation, together known as MiFID II. The Commission wrote to ESMA on March 14, 2016, notifying ESMA that amendments are required to the RTS on position limits for commodity derivatives, non-equity transparency requirements and on the exemption from licence requirements under MiFID II for commodity trading firms (the ancillary activities exemption). ESMA has confirmed that it will act swiftly in preparing its Opinions on the proposed amendments. It is as yet unknown whether the other RTS produced by ESMA last year have been accepted by the European Commission.
View the letters.Topic : MiFID II -
EU Technical Standards on Reporting of Trade Activity by Trading Venues to Regulators Published
03/17/2016
Commission Implementing Regulation on implementing technical standards on the timing, format and template of notifications to regulators by trading venues of financial instruments was published in the Official Journal of the European Union. In accordance with Market Abuse Regulations trading venues are required to notify regulators daily with information relating to the trade of financial instruments. The ITS required trading venues to report to their national regulators on the financial instruments which were subject to a request for admission to trading or admitted to trading or traded on the trading venue and set out, in accordance with the MAR, the required format and details of trading activity that must be provided. The information required for example, for the trade of Derivatives, includes the expiry date, price multiplier and underlying issuer. The full list of requirements are contained in the Annex to the ITS. It is intended that the related reporting obligations under the Markets in Financial Instruments Regulation will align with the obligations under these ITS. The ITS will apply from July 3, 2016.
View the ITS. -
EU Technical Standards on Reporting of Trade Activity by Trading Venues to Regulators Published
03/17/2016
Commission Implementing Regulation on the implementation of technical standards regarding the timing, format and template of notifications to regulators by trading venues of financial instruments was published in the Official Journal of the European Union. In accordance with the Market Abuse Regulation, trading venues are required to notify national regulators daily with certain transaction information. The ITS sets out the required format and details of trading activity that must be provided. With regards to derivatives trading, for example, information relating to the expiry date, price multiplier, and underlying issuer must be disclosed. The full list of requirements is contained in the Annex to the ITS. It is intended that the related reporting obligations under the Markets in Financial Instruments Regulation will align with the obligations under these ITS. The ITS will apply from July 3, 2016.
View the ITS.
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Regulatory Technical Standards for the Submission and Content of Notifications to EU Regulators Published
03/01/2016
The European Commission adopted a Delegated Regulation, in the form of Regulatory Technical Standards, detailing the content of the financial instrument reference data that must be supplied to regulators. The adopted RTS will be made under the Markets Abuse Regulation and Markets in Financial Instruments Regulation. They establish requirements for regulated entities to provide instrument reference data to regulators, which are then transmitted by regulators to the European Securities and Markets Association. The adopted RTS details which financial instruments are to be included as part of the reported instrument reference data. The adopted RTS also outlines ESMA's responsibility to review, assess, consolidate and publish the data on its website using automated processes. This adopted RTS will apply from July 3, 2016.
View the adopted RTS.
View the Annex. -
International Swaps and Derivatives Association Publishes Principles for US/EU Trading Platform Recognition
02/24/2016
The International Swaps and Derivatives Association published a paper which analyzes the regulatory frameworks in the US and EU for the supervision and oversight of trading platforms and aims to provide principles for the recognition of EU trading platforms by the US Commodity Futures Trading Commission. Both the US and the EU have introduced rules which require certain derivatives to be traded on trading platforms. The US rules, which came into force in October 2013, provide that US persons may only trade the relevant derivatives on platforms that have registered as a Swap Execution Facility and that are subject to the oversight of the CFTC. The EU Markets in Financial Instruments Regulation, which is currently due to come into force on January 3, 2017 unless proposed legislation is passed to delay it for a year, requires certain derivatives to be traded on EU trading venues. ISDA considers that the CFTC should be able to make comparability decisions, deeming EU trading platforms comparable with those in the US, by focusing on the outcomes and core objectives of the EU regime, thereby recognizing EU trading platforms as SEFs. This would allow US persons to trade on an EU trading venue in compliance with the US trade execution rules.
View ISDA's paper. -
Financial Conduct Authority Publishes Review Report on Assessing Suitability
02/19/2016
The Financial Conduct Authority published the findings of its review into the research and due diligence processes that firms undertake on the products and services they recommend to retail clients. The FCA assessed 13 advisory firms and also visited seven external research and due diligence consultancy firms. Key findings that emerged from the thematic review were that most firms seek to achieve positive outcomes for their clients when undertaking research and due diligence and that there is some evidence of good practice. However, many firms do not demonstrate good practice consistently across all products and services. The FCA found that a corporate culture of challenge was a key driver of good research and due diligence. Those firms that did not have a corporate culture of challenge: (i) did not try to understand or challenge their own inappropriate bias towards products, services or providers; and (ii) inadequately managed conflicts of interest. The FCA has taken steps to address the issues found, instructing three firms to improve their research and due diligence process. The FCA has also asked one firm to complete a past business review. The FCA intends to provide firms with further communications that set out its expectations in this area in greater detail. In addition, the FCA's second consultation paper on implementing the Markets in Financial Instruments Directive, due to be published later this year, will cover requirements for research on products.
View the FCA's review report. -
European Commission Proposes One-Year Extension for Application of MiFID II
02/10/2016
The European Commission proposed a one-year extension to the effective date of the Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation, collectively known as MiFID II. The proposal, if approved, would mean that national regulators would have an additional year to comply with MiFID II. The new effective date would be January 3, 2018 instead of January 3, 2017.
Read more.Topic : MiFID II -
European Securities and Markets Authority Publishes Guidelines for Complex Debt Instruments and Structured Deposits
02/04/2016
The European Securities and Markets Authority published translations of its Guidelines for complex debt instruments and structured deposits under the Markets in Financial Instruments Directive II. MiFID II allows investment firms, under certain circumstances only, to provide clients with investment services that consist of execution, reception and transmission of orders only (known as execution-only orders), without the investment firm having to obtain any relevant client information to assess whether the service or product provided is appropriate for a particular client. Such products must be non-complex. ESMA's Guidelines identify those complex products for which execution-only services may not be provided, setting out a non-exhaustive list of examples of such products. National regulators have two months to notify ESMA whether or not they comply with the Guidelines. The Guidelines will apply from January 3, 2017.
View the Guidelines.Topic : MiFID II -
European Supervisory Authorities Call on European Commission to Remedy Legal Discrepancies Identified in the EU Regulation of Cross-Selling of Financial Products
01/27/2016
The European Supervisory Authorities published a letter, dated January 26, 2016, from their Chairpersons to the European Commission on issues arising in the regulation and supervision of cross-selling financial products in the EU. The ESAs – the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority – are responsible for preparing guidelines on the supervision of cross-selling of financial products for each of the securities, banking and insurance sectors. However, due to discrepancies between EU primary legislation which governs such cross-selling practices across the different sectors, the ESAs are unable to provide harmonized guidelines. The primary legislation includes the Mortgage Credit Directive, the Payment Accounts Directive, the Insurance Mediation Directive and the revised Markets in Financial Instruments Directive. Differences identified relate to the formal wording of the legislation, scope, level of granularity and date of application. The ESAs consider that a more harmonized approach across the sectors would be beneficial for consumers, financial institutions engaged in cross-selling and national regulators supervising the practice. The ESAs therefore urge the Commission to consider reviewing the underlying legislation, including within the Commission's current consultations on Retail Financial Services in the Banking and Insurance Sectors and/or its Call for Evidence on the regulatory framework in financial services.
View the ESA's letter. -
European Securities and Markets Authority Consults on Guidelines under MiFID II
12/23/2015
The European Securities and Markets Authority launched a consultation on proposed Guidelines on transaction reporting, reference data, order record keeping and clock synchronization. ESMA is required to prepare the guidelines under the Markets in Financial Instruments Regulation and the revised Markets in Financial Instruments Directive, together known as MiFID II. The proposed Guidelines are based on ESMA's final draft Regulatory Technical Standards relating to transaction reporting, reference data, order record keeping and clock synchronization which are still due to be endorsed by the European Commission. The proposed Guidelines may therefore need to be amended, depending on the adopted version of the RTS. The proposed Guidelines aim to assist investment firms, approved reporting mechanisms, trading venues and systematic internalizers in complying with the provisions of the RTS, focusing on the preparation of transaction reports and order data records for various scenarios. Responses to the consultation are due by March 23, 2016 and ESMA aims to publish the final Guidelines in the second half of 2016. MiFID II will apply directly across the EU from January 3, 2017.
View the consultation paper.Topic : MiFID II -
Final EU Guidelines on Cross-Selling Practices Published
12/22/2015
The European Securities and Markets Authority published a final report and final Guidelines on cross-selling practices within the meaning of the revised Markets in Financial Instruments Directive. The Guidelines will apply from January 3, 2017 to the national regulators responsible for the conduct of business supervisory oversight of investment firms and credit institutions when providing investment services and to management companies and external Alternative Investment Fund Managers when they provide investment services under the Directive on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities and the Alternative Investment Fund Managers Directive respectively. Initially, ESMA had consulted jointly with the European Banking Authority and European Insurance and Occupational Pensions Authority on joint guidelines for the banking and insurance sectors. However, following feedback received to that consultation, it was decided that ESMA should adopt guidelines solely on the basis of the revised MiFID. Firms should note, however, that the final Guidelines do not affect their obligations to comply with other conduct of business standards that may be applicable to them.
Read more.Topic : MiFID II -
Final EU Guidelines for the Assessment of Knowledge and Competence under MiFID II
12/17/2015
The European Securities and Markets Authority published a final report and final guidelines on the assessment of knowledge and competence of individuals providing investment advice or information about financial instruments, investment services or ancillary services to clients on behalf of investment firms. Under the revised Markets in Financial Instruments Directive, an investment firm is required to ensure that individuals giving investment advice or providing information about financial instruments, investment services or ancillary services to clients on its behalf have the necessary knowledge and competence to do so and to satisfy the firm's obligations on suitability, appropriateness and reporting and provision of information to clients. An investment firm may be requested to demonstrate that the requirements are met on request by its national regulator. National regulators must publish the criteria that will be used to assess such knowledge and competence. ESMA's guidelines, which apply to national regulators and investment firms, specify the criteria for the assessment of knowledge and competence, establishing the minimum standards that staff providing the relevant services should meet. The guidelines will come into effect on January 3, 2017.
View the guidelines.Topic : MiFID II -
UK Regulator Consults on Implementing the Revised Markets in Financial Instruments Directive
12/15/2015
The Financial Conduct Authority published proposals for implementing certain aspects of the revised Markets in Financial Instruments Directive, which together with the Markets in Financial Instruments Regulation is known as MiFID II. The revised MiFID must be transposed into the national laws of Member States whereas MiFIR is directly applicable across the EU. MiFID II is currently due to apply from January 3, 2017 although there have been discussions between the European authorities about possibly delaying this date. On the existing timeline, Member States must transpose the revised MiFID into their national laws by July 3, 2016.
Read more.Topic : MiFID II -
European Securities and Markets Authority Publishes Further Technical Standards under MiFID II
12/11/2015
The European Securities and Markets Authority published further final draft Implementing Technical Standards due under the revised Markets in Financial Instruments Directive, or MiFID II. The ITS cover: (i) cooperation arrangements between national regulators for supervision of a trading venue of substantial importance in a host and home Member State; (ii) the format and timing of the communications and the publication of the suspension and removal of financial instruments from trading on a regulated market, a multilateral trading facility or an organized trading facility; (iii) notification or provision of information for application for authorization of data reporting service providers; (iv) format of the reports of position reports by position holders; (v) format and timing of weekly position reports; (vi) cooperation between national regulators in supervisory activities, on-site verifications, and investigations and for the exchange of information; (vii) consultation of other national regulators prior to granting an authorization for certain types of investment firms; and (viii) submission of information on sanctions and measures. The final draft ITS have been sent to the European Commission for endorsement.
View the final draft ITS.Topic : MiFID II -
European Securities and Markets Authority Final Report on Guidelines for Complex Debt Instruments and Structured Deposits
11/30/2015
The European Securities and Markets Authority published a final report setting out Guidelines for complex debt instruments and structured deposits under the Markets in Financial Instruments Directive II. MiFID II allows investment firms, under certain circumstances only, to provide clients with investment services that consist of execution, reception and transmission of orders only (known as execution-only orders), without the investment firm having to obtain any relevant client information to assess whether the service or product provided is appropriate for a particular client. Such products must be non-complex and ESMA has developed Guidelines to identify the complex products for which execution-only services may not be provided. The Guidelines appear in Annex V of the report and set out a non-exhaustive list of examples of such products. The final report also includes feedback received by ESMA on its earlier consultation launched in March 2015. The Guidelines will be translated into all official languages of the EU and national regulators will have two months from the date of publication of the translated versions to notify ESMA whether or not they comply with the Guidelines. The Guidelines will apply from January 3, 2017.
View the Guidelines.Topic : MiFID II -
Potential Delay to MiFID II Entering into Force
11/27/2015
The European Parliament issued a press release announcing that it has informed the European Commission that it is ready to accept a one-year delay to MiFID II entering into force. The European Parliament also published two letters addressed to Lord Jonathan Hill, Commissioner for Financial Stability and the Commission, on the same date. The first letter states that such a delay would be subject to two conditions. The Commission would have to: (i) finalize the implementing legislation as soon as possible, taking into account the European Parliament’s comments on content (which are set out in the European Parliament's second letter); and (ii) regularly report to the European Parliament on the progress related to MiFID II implementation, timelines and key objectives.
View the European Parliament's press release.
View the first letter to Commissioner Hill.
View the second letter to Commissioner Hill.Topic : MiFID II -
European Securities and Markets Authority Protocol on Operation of Market in Financial Instruments Directive Database
11/16/2015
The European Securities and Markets Authority published a Protocol on the operation of its online Market in Financial Instruments Directive database. The database publishes the results obtained from calculations made by national regulators in connection with shares admitted to trading on a regulated market. The calculations relate to, amongst other things, average daily turnovers and number of transactions. The information aims to provide market participants with appropriate information enabling them to recognize liquid shares and make determinations on waivers for pre-trade transparency requirements and delayed post-trade publication. The information must be made available by national regulators under MiFID and forms part of the MiFID market transparency regime. The Protocol sets out the responsibilities and tasks to be carried out by ESMA and national regulators and also provides practical and technical guidance as to how calculations should be made.
View the MiFID database.
View the Protocol.Topic : MiFID II -
European Securities and Markets Authority Publishes Final Guidelines on the Commodity Derivatives Definition
10/21/2015
The European Securities and Markets Authority published translations of its Guidelines on the application of the definition of commodity derivatives under the Markets in Financial Instruments Directive (known as MiFID I). The guidelines aim to provide a common, uniform and consistent application of the definition of commodity derivatives. There is no commonly adopted definition of derivatives in the EU under MiFID I and ESMA was concerned that this would lead to the inconsistent application of the European Market Infrastructure Regulation where it refers to the MiFID commodity derivatives definition. The Guidelines are also relevant to the reporting obligations under the Regulation on wholesale energy market integrity and transparency, known as REMIT. The Guidelines also aim to ensure continuity when MiFID II replaces MiFID I from January 3, 2017. The Guidelines were initially published on May 6, 2015 with ESMA's final report and feedback and applied from August 7, 2015.
View the Guidelines. -
Corrigendum to Markets in Financial Instruments Regulation Published
10/15/2015
A corrigendum was published in the Official Journal of the European Union correcting the date of entry into force of Article 4(6) of the Markets in Financial Instruments Regulation. Under Article 4(6), the European Securities and Markets Authority must develop Regulatory Technical Standards on national regulators' powers to waive the pre-trade transparency requirements under which market operators and investment firms operating a trading venue must make public information such as current bid and offer prices for shares, exchange-traded funds and other similar financial instruments traded on a trading venue. In particular, the RTS should specify, amongst other things, the range of bid and offer prices to be made public for each class of instrument, as well as the depth of trading interest at those prices and the negotiated transactions that do not contribute to price formation. This provision should have been applicable from the date MiFIR entered into force, July 2, 2014, however Article 55 did not include the cross-reference.
View the corrigendum.Topic : MiFID II -
European Securities and Markets Authority Publishes Final Draft Technical Standards under MiFID II
09/28/2015
The European Securities and Markets Authority published a final report and final draft Regulatory and Implementing Technical Standards under the new Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation, together known as MiFID II. MiFID II applies from January 3, 2017. The 28 final draft standards cover: (i) pre- and post-transparency requirements for debt and equity securities; (ii) rules for investment firms and trading venues relating to algorithmic trading; (iii) data publication and access; (iv) requirements applying on and to trading venues; (v) the methodology for the calculation and application of position limits for commodity derivatives; (vi) when an activity is to be considered ancillary to the main business for the purposes of the commodity derivatives exemption; (vii) market data reporting and the reporting obligation; (viii) the clearing obligation for derivatives and timing for acceptance for clearing (STP); (ix) information requirements for best execution; and (x) rules for on non-discriminatory access to CCPs, trading venues and benchmarks.
View the final report and technical standards.Topic : MiFID II -
European Securities and Markets Authority Consults on Remaining Draft Implementing Technical Standards under MiFID II
08/31/2015
The European Securities and Markets Authority published a consultation paper on the three remaining draft Implementing Technical Standards under the Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation (together known as MiFID II) that it has not yet consulted upon. These draft ITS concern: (i) the format and timing of communications and publications in case of removal and suspension of financial instruments from trading on a trading venue; (ii) the standard forms, templates and procedures for authorization of Data Reporting Services Providers, covering DRSP applications for authorization, as well as notifications to changes of membership; and (iii) the format and timing of position reports by investment firms and market operators of trading venues for commodity derivatives, emission allowances and derivatives thereof. Comments to the consultation paper are due by October 31, 2015.
View the consultation.
Topic : MiFID II -
European Securities and Markets Authority Publishes Final Guidelines on the Commodity Derivatives Definition under Markets in Financial Instruments Directive
05/06/2015
The European Securities and Markets Authority published its guidelines on the application of the definition of commodity derivatives under the Markets in Financial Instruments Directive (known as MiFID I). The guidelines aim to provide a common, uniform and consistent application of the definition of commodity derivatives. There is no commonly adopted definition of derivatives in the EU under MiFID I, which can result in the inconsistent application of EMIR when it refers to the MiFID commodity derivatives definition. The guidelines also aim to ensure continuity when MiFID II replaces MiFID I from January 3, 2017. The guidelines will apply from August 7, 2015.
View the guidelines.Topic : MiFID II -
European Securities and Markets Authority Consults on Draft Guidelines on Knowledge and Competence under MiFID II
04/23/2015
The European Securities and Markets Authority launched a consultation on draft guidelines specifying the criteria for the assessment of the knowledge and competence of employees in investment firms that provide investment advice, information aboutfinancial instruments, investment services or ancillary services to clients. Under the new Markets in Financial Instruments Directive II, investment firms will have to ensure and be able to demonstrate to national regulators that employees of the firm involved in such activities have the necessary knowledge and competence to provide such advice, to act in the best interests of the client and to act honestly, fairly and professionally. The draft guidelines will apply to investment firms and national regulators from January 3, 2017, the date that MiFID II comes into effect. Responses to the consultation are due by July 10, 2015. ESMA intends to publish its final report in Q4 2015.
Topic : MiFID II -
Technical Standards on the Assessment of the Proposed Acquisition of an Investment Firm under MiFID I and II
03/27/2015
The European Securities and Markets Authority published its final report and final draft technical standards on the assessment of acquisitions and increases in qualifying holdings in investment firms under the Markets in Financial Instruments Directive I. The final draft technical standards comprise regulatory technical standards to establish an exhaustive list of information that an acquirer of an investment firm must provide to the relevant national regulator and implementing technical standards with standard forms, templates and procedures for cooperation and exchange of information between relevant national regulators. ESMA previously submitted draft RTS and ITS to the European Commission in December 2013. However, due to an amendment to legislation, those RTS need to be amended to cover information that the proposed acquirer must provide on the reputation and experience of any person who will direct the business of the investment firm after the proposed acquisition. The RTS and ITS published by ESMA on March 27, 2015 are the proposed revised RTS and ITS. Under MiFID II, which comes into effect on January 3, 2017, ESMA is required to prepare identical RTS and ITS and therefore ESMA considers that the revised RTS and ITS also satisfy its obligations under MiFID II.
View ESMA final report.Topic : MiFID II -
UK Government Consults on Transposing MiFID II
03/27/2015
HM Treasury published a consultation paper on its proposed transposition of the Markets in Financial Instruments Directive II into UK law, including four draft statutory instruments. Member States are required to adopt measures transposing MiFID II by July 3, 2016 and to apply the provisions from January 3, 2017. In addition to the proposed statutory instruments, the FCA will also need to revise current rules and make new rules to transpose MiFID II. The proposed statutory instruments include provisions which create the position limit regime for commodity derivatives, make operating an organized trading facility a regulated activity, bring emission allowances, structured deposits and option and futures within the regulatory perimeter, provide for the exercise of the optional exemptions and transpose other exemptions and impose obligations on certain unauthorized firms in relation to algorithmic trading, provision of direct electronic access services and acting as a general clearing member of the CCP. The consultation closes on June 1, 2015. It is expected that the proposed legislation will be made in 2016.
View the consultation page.Topic : MiFID II -
Financial Conduct Authority’s Initial Policy Options for Conduct of Business and Organizational Requirements under MiFID II
03/26/2015
The Financial Conduct Authority published a discussion paper on its proposals for implementing the Markets in Financial Instruments Directive II conduct of business and organizational requirements. The paper sets out the policy choices available to the FCA in implementing some provisions of MiFID II including: (i) the application of MiFID II to insurance-based investment products and pensions; (ii) the best approach to implementing the extended application of MiFID II’s investor protection requirements to the sale of and advice on structured deposits; (iii) whether a ban on discretionary investment management firms accepting commissions and other deposits is appropriate for retail client business; (iv) changing the criteria for local authorities’ treatment as elective professional clients; (v) adopting the new requirements for independent advice on shares, bonds, derivatives and structured products; (vi) extending the MiFID II remuneration rules for conduct of business to non-MiFID firms; and (viii) amending the UK approach to recording telephone conversations and electronic communications. The FCA paper also highlights key conduct of business changes that firms will be required to comply with from January 3, 2017. In particular, the paper discusses types of third party inducements that firms will be able to receive and the classification of products as either non-complex or complex, relevant to the determination of whether the appropriateness test must be applied. The FCA consultation closes on May 26, 2015. The FCA intends to consult fully on implementing the MiFID II requirements in December 2015 and to publish its final rules in June 2016.
View the FCA discussion paper.
View an FCA implementation timetable.Topic : MiFID II -
Proposed Guidelines on the Assessment of Financial Instruments as Complex under MiFID II
03/24/2015
The European Securities and Markets Authority launched a consultation on proposed guidelines for the assessment of whether debt instruments and structured deposits are complex or not. Under the revised Markets in Financial Instruments Directive II, investment firms are able to provide reception, transmission and execution of orders for clients without carrying out the appropriateness test subject to certain conditions being met, including that the services do not relate to financial instruments that are (i) bonds, other forms of securitized debt and money market instruments incorporating a structure which makes it difficult for a client to understand the risk involved; or (ii) structured deposits incorporating a structure which makes it difficult for a client to understand the risk or return or the cost of exiting the product before term. ESMA is required to develop, by January 3, 2016, guidelines for the assessment of such instruments to help firms and national regulators classify correctly MiFID debt instruments and structured deposits as either complex or non-complex.
View ESMA’s consultation paper.Topic : MiFID II