The Financial Conduct Authority published final guidance for Multilateral Trading Facility operators on regulatory requirements for MTF rulebooks and procedures as set out in the Market Conduct Sourcebook of the FCA Handbook. The FCA consulted on its proposed guidance late in 2014 which was based on feedback received through a thematic review. The FCA expects all MTF operators to be able to demonstrate that they have considered the good practice observations included in the guidance when setting their approach to compliance with the Market Conduct requirements.

View the final guidance.

The European Central Bank and the Bank of England published a joint press release announcing that they had agreed to enhanced information exchange and cooperation arrangements for UK CCPs with significant euro-denominated business. Further, both central banks are extending the scope of their standing swap line order to aid the provision of multi-currency liquidity support by both central banks to CCPs established in the UK and the euro area. As a result of the measures, the UK Government announced that it would withdraw the two as yet undecided cases brought by the UK Government against the ECB’s CCP location policy. The announcements follow the General Court judgment on March 4, 2015, which annulled the ECB’s Eurosystem Oversight Policy Framework which had the effect of requiring CCPs with significant euro-denominated business to be located within the eurozone. The ECB has not yet made any announcement about the documents which are the subject of the two cases to be withdrawn (Decision of 11 December 2012 on the terms and conditions of TARGET2 and the ECB’s Statement of Standards published on 18 November 2011 in so far as it sets out a location policy for CCPs).

View the ECB / BoE press release.

View the UK Government’s announcement.

The US Securities and Exchange Commission proposed rule amendments to require broker- dealers trading in off-exchange venues to become members of a national securities association. The amendments would seek to heighten regulatory oversight of active proprietary trading firms. The proposed amendments to Rule 15b9-1 under the Exchange Act of 1934 would narrow the current exemption available to certain broker-dealers from membership of a national securities association if the broker-dealer is a member of a national securities exchange, carries no customer accounts and has annual gross income of no more than $1,000 that is derived from securities transactions effected otherwise than on a national securities exchange of which it is a member. The exemption was originally tailored to exchange specialists and other floor members that might need to utilize limited hedging or other off-exchange activities secondary to their floor-based business. The proposed amendments would also update the exemption that permits off-exchange transactions necessary to comply with the regulatory requirements preventing trade-throughs. The public comment period on the proposed rule amendment will last 60 days following its publication in the Federal Register.
 

View the proposed rule.

The UK Payment Systems Regulator published the regulatory framework for payment systems in the UK which sets out the PSR’s approach to regulation of payment systems and related industry, work programme regulatory tools and guiding principles. The new PSR is fully operational as of April 1, 2015. Two market reviews were announced alongside the publication of the regulatory framework. The first review is into the ownership and competitiveness of payment systems infrastructure which will look into the ownership of a small number of banks of both BACS, Faster Payments Services and LINK payment systems and the central infrastructure for those systems, VocalLink. The second review is into the supply of indirect access to payment systems which is provided only by Barclays, HSBC, Lloyds and RBS. The PSR is seeking comments on the scope of the reviews with a view to finalizing the terms of reference for each review by the end of May at which time more detailed timetables will be available.

View the regulatory framework.

The Financial Conduct Authority published a press release relating to its November 2014 consultation paper on the Payment Systems Regulator, which is the new UK regulator that will regulate the largest UK payment systems. The press release states that any of the directions mentioned in the consultation that were to come into force on April 1, 2015 will not come into force until April 30, 2015. This is so that stakeholders have more time to consider the FCA’s final directions and views that are to be published in the FCA’s PSR policy statement before the end of March 2015.

View the FCA press release

The International Organization of Securities Commissions and Committee on Payments and Market Infrastructures jointly announced that they have begun a review of CCP stress testing. The aim of the review is to identify how the Principles for Financial Market Infrastructures standards published jointly by IOSCO and the CPMI in 2012 are being implemented, and whether any further guidance is needed.

View the joint press release

The Bank of England published its annual report on the supervision of Financial Market Infrastructures which sets out the way in which the BoE has exercised its responsibilities in relation to recognized payment systems, CCPs and securities settlement systems over the past year. The report discusses the progress that has been achieved on issues including: (i) credit and liquidity risk; (ii) recovery and resolution; (iii) operational risk management; (iv) governance; and (v) disclosure. The report lists the forward-looking priorities that the bank intends to focus on in the next year, such as: (i) assessing the UK CCPs’ stress-testing practices; (ii) evaluating proposals on CCP recovery and resolution that may extend to other types of FMI; (iii) addressing the root causes of excess operational risk; and (iv) improving resilience against cyber-attacks.

View the report

HM treasury published the Banking Act 2009 (Inter-Bank Payment Systems) (Disclosure and Publication of Specified Information) (Amendment) Regulations 2015. These Regulations widen the remit of information-sharing between the Bank of England and the Payment Systems Regulator, allowing the BoE to share information that it has obtained through its oversight of interbank payment systems with the PSR. The BoE will therefore no longer be limited to only share information with the PSR that is relevant to financial stability. On the same day, HM Treasury also published the Payment Services (Amendment) Regulations 2015. These regulations amend the Payment Services Regulations 2009 and transfer the supervision and enforcement functions on access to payment systems from the Competition Markets Authority to the newly formed PSR. Both regulations enter into force on April 1, 2015, the date on which the PSR becomes fully operational.

View the Regulations and Explanatory Memoranda

View the Regulations and Explanatory Memoranda 2

View the Regulations and Explanatory Memoranda 3

View the Regulations and Explanatory Memoranda 4  

The EU General Court delivered its judgment on the UK Government’s challenge of the European Central Bank’s CCP location policy set out in the ECB’s Eurosystem Oversight Policy Framework. The EU General Court has annulled the Eurosystem Oversight Policy Framework in so far as it sets a requirement for CCPs involved in the clearing of securities to be located within the Eurozone. The policy’s aim was to prevent CCPs in the European Union but outside the Eurozone from being able to have access to ECB Euro settlement facilities. The outcome is that UK CCPs will have access to Euro settlement facilities with the ECB, as generally required under EMIR, without being forced to relocate their businesses.

View the judgment

The European Banking Authority launched a consultation on proposed draft Regulatory Technical Standards on the prudential requirements for central securities depositories. The EBA is required to prepare the RTS under the EU Regulation on Settlement and Central Securities Depositories, which aims to increase the safety and efficiency of securities settlement and settlement infrastructures. The EBA is consulting on three proposed draft RTS which cover: (i) capital requirements for CSDs; (ii) the additional risk-based capital surcharge applicable to CSDs carrying out ancillary banking activities; and (iii) the framework and tools for monitoring, measuring, managing and reporting of the credit and liquidity risks related to any ancillary banking activities offered by a CSD. The consultation closes on April 27, 2015. The EBA must submit the draft RTS to the Commission by June 18, 2015.

View the consultation

UK legislation implementing part of the EU Regulation on Settlement and Central Securities Depositories was enacted. The Financial Markets and Insolvency (Settlement Finality) (Amendment) Regulations 2015 amend relevant UK legislation to reflect the change brought in by the EU Regulation that requires national regulators to notify the European Securities and Markets Authority of any designation of a payment or securities settlement system. In the past, such notifications were made to the European Commission. The UK designated national regulators for these purposes are the Bank of England and the Financial Conduct Authority.

View the UK legislation

UK legislation was enacted to bring additional benchmarks within the UK regulatory perimeter. The additional benchmarks are ISDAFIX, Sterling Overnight Index Average, also known as SONIA, Repurchase Overnight Index Average, also known as RONIA, WM/Reuters London 4 p.m. Closing Spot Rate, London Gold Fixing, LBMA Silver Price and ICE Brent Index. The LIBOR benchmark was already subject to regulation. Bringing the additional benchmarks within the regulatory perimeter are a result of the initial recommendations on benchmarks of the Fair and Effective Markets Review. A Policy Statement was also published by the Financial Conduct Authority on March 10, 2015, on the seven new benchmarks it will be regulating and supervising. This includes the FCA's final rules amending Chapter 8 of the Market Conduct Sourcebook (Mar 8), which was originally designed for benchmarks determined through a submission process, such as LIBOR. The rules have now been adapted to the new benchmarks being brought into regulation, and in particular to benchmarks without submitters. The new rules also introduce perimeter guidance to identify persons that carry out the regulated activity of acting as benchmark submitters. The new legislation and FCA rules enter into force on April 1, 2015.

View the legislation and FCA Policy Statement

The Global Legal Entity Identifier Foundation announced the launch of its new website. GLEIF was created by the Financial Stability Board and established the Legal Entity Identifier, a 20-digit alphanumeric code which is a common standard and a unique key made public that is to be used unambiguously to identify legal entities in the course of various activities such as financial transactions across different markets, products and regions.

View the new Website.

The US Federal Reserve issued "Strategies for Improving the US Payment System" which introduces a plan for collaborating with payment system stakeholders. The plan aims to enhance the efficiency of the US payment system and caters to large and small businesses, emerging payments firms, card networks, payment processors, consumers and financial institutions. The paper outlines the Federal Reserve’s intent to create a task force to identify a more effective approach to safer and faster payment capabilities. To further clarify the details on payment system improvement the Federal Reserve will host a webcast at 1:00 PM Eastern Time on January 29, 2015. The webcast will share views on the Federal Reserve’s vision for the future US payment system and plans for collaborating with stakeholders to achieve shared goals. In addition, a subsequent series of FedForum teleseminars on February 4 and 10 will present an overview of the strategies and a question-and-answer session.

Access to the webcast.

Registration for the FedForum events.

View the US Federal Reserve paper.

The participants of the US-EU Financial Market Regulatory Dialogue met to discuss key regulatory topics including the implementation of Basel III capital, leverage, derivatives reforms, benchmarks and developments on cross-border resolution. Amongst other issues, the Financial Stability Board’s proposals for an international minimum standard on total loss absorbing capacity were welcomed and EU participants raised concerns about the Volcker Rule’s effect on foreign funds. The participants included representatives of the European Commission, the European Securities and Markets Authority, the Securities Exchange Commission, US Treasury, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Commodity Futures Trading Commission. The next meeting will take place in Brussels, Belgium in July 2015.

View the joint US-EU Financial Market Regulatory Dialogue statement.