FCA focus on MiFID II update
Beside the significant resource FCA has put into ESMA’s work on the implementing measures, FCA announces that it has been working on three main workstreams.
- FCA MiFID II implementation
FCA has been identifying the major changes that they will need to make as an organisation and how best to go about addressing them. The biggest practical challenges for FCA will be around issues such as transaction reporting, commodities position reporting and provision of information to ESMA for various purposes. But a significant part of our implementation will also be about communication with firms to assist them in getting to grips with the legislation and dealing with the various notifications, authorisations and variations of permissions that the legislation will require. In that regard the aim is to be in a position to process the notifications and applications so that firms can be ready on 3 January 2017. We will provide much more detail on all of this in the course of next year.
- FCA Handbook changes – making the necessary changes to implement MiFID II
These need to be in place by the middle of 2016. However, FCA needs to know more about the implementing measures, particularly the delegated acts, before they will be in a position to consult on the changes. It is likely therefore that the formal consultation on Handbook changes will not take place until towards the end of 2015. However, FCA will be engaging on aspects of the changes need to make ahead of then. In particular FCA expects to issue a discussion paper towards the end of 2015Q1 which will seek views on various issues relating to conduct of business. This will, amongst other things, be asking about how FCA should approach dealing with the fact that the conduct of business rules for investment business currently cover insurance-based investment business as well as business relating to MiFID financial instruments.
- Legislation – FCA will work with the Treasury to agree the legislative changes required to implement MiFID II.
The Treasury is looking to consult on the changes in the first quarter of 2015. This consultation will help to facilitate FCA’s own consultation on Handbook changes to implement MiFID II later in 2015. The topics that will be covered by the Treasury consultation are disparate but will include amongst others: changes to the boundaries of UK regulation through amendments to the regulated activities order, an authorisation regime for data reporting service providers, changes to the FCA’s supervisory powers (including for position limits), implementing the third country branching provisions in MiFID and changes to the requirements to be met by recognised investment exchanges.
The Treasury will also lead in representing the UK at transposition workshops on MiFID II that the Commission is organising for Member States. The first of these meetings will take place in January 2015. The workshops are designed to help Member States transpose MiFID II in a timely, consistent and legally sound manner.
More information is available through the following link.
ESMA publishes draft Implementing Technical Standards under the Capital Requirements Regulation
The European Securities and Markets Authority (ESMA) today submitted its Final Report along with a draft Implementing Technical Standard (ITS) for specifying main indices and recognised exchanges under an empowerment in the Capital Requirements Regulation to the European Commission.
This submission follows a consultation with market participants in the autumn of 2014. ESMA’s deadline to submit the draft ITS was 31 December 2014.
The European Commission now has 3 months to endorse the ITS.
moreESMA provides implementing rules for MiFID II
The European Securities and Markets Authority (ESMA) has published today its final technical advice (TA) and launches a consultation on its draft regulatory technical and implementing standards (RTS/ ITS) regarding the implementation of the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).
Both ESMA’s TA and draft RTS translate the MiFID II/MiFIR requirements into practically applicable rules for market participants and national supervisors. The new regulatory framework aims at ensuring that secondary markets are fair, transparent and safe and that investors’ interests are safeguarded when being sold investment products.
2014/1574 Press Release
2014/1569 Technical Advice
2014/1570 Consultation Paper
FCA supervisory priorities arising from EMIR
During 2015, areas of focus for FCA will include:
- counterparties complying with the requirements for trade reporting, including having established connectivity or appropriate delegated reporting arrangements, internal systems to ensure the accuracy of reports, and having both acquired Legal Entity Identifiers and ensured that they are renewed annually;
- non-financial firms assessing and monitoring their status against the clearing threshold in line with EMIR;
- clearing members complying with the EMIR Article 39 requirements around segregation, account offering and disclosure of risks and costs associated with the clearing services they offer to clients; and
- readiness of financial firms and non-financials above the clearing threshold for the clearing obligation and for collateralisation of non-centrally cleared OTC derivatives.
From 2015 onwards, FCA will start gradually integrating EMIR regulatory requirements into business-as-usual supervision. The supervisory approach will be risk based, taking into account the position of particular firms and the markets in which they operate.
A number of EMIR obligations have already been in force since 2013/2014, and new ones will continue to come into force at various points from 2015 onwards. In respect of each EMIR obligation, FCA approach has been, and continues to be, to:
- confirm with major derivative market participants and relevant industry bodies the delivery of implementation plans and discuss any issues arising
- follow-up on any issues of concern, with individual firms or on an industry-wide basis and
- sample across a range of firms for an indication of the level of compliance and any issues to be addressed.
FCA then gradually integrates supervision of EMIR obligations into the Firm Systematic Framework, which is outlined in Section 2.5 of the FCA Business Plan 2013/14, and follow the general approach to supervision, as outlined in Section 1 of the FCA Business Plan 2014/2015.
In 2015, FCA supervision of EMIR requirements will focus on the reporting of derivative contracts to trade repositories, clearing members’ Article 39 obligations in relation to the clearing services they offer to clients, and readiness of relevant market participants for the clearing obligation and the bilateral margin requirements for non-cleared trades.
More information is available via the following link.
moreESMA consults on revised EMIR standards on the reporting to trade repositories
On 19 Dec2014 European Securities and Markets Authority (ESMA) has published a consultation paper on the revision of the Regulatory Technical Standards (RTS) and implementing technical standards (ITS) in relation to the European Market Infrastructure Regulation (EMIR).
On 21 Jan 2017 the revised RTS and ITS were published in the Official Journal. Updated information is available here.
The ESMA RTS/ ITS deal with the obligation of counterparties’ and CCP’s to report to trade repositories. Since the entry into force of the RTS and ITS, ESMA has worked on ensuring their consistent application. The practical implementation of EMIR reporting showed some shortcomings and highlighted particular instances for improvements so that the EMIR reports better fulfil their objectives.
ESMA revised standards propose to clarify the interpretation of the data fields needed for the reporting to trade repositories and the most appropriate way of populating them.
ESMA will consider stakeholder’s feedback to the proposed revised standards by 13 February 2015.
moreESMA consults on implementing measures for new settlement regime
The European Securities and Markets Authority (ESMA) has launched three consultations on proposed technical standards, technical advice and guidelines implementing the Central Securities Depositories Regulation (CSDR).
The aim of the CSDR is to harmonise certain aspects of the settlement cycle and settlement discipline and to provide a set of common requirements for CSDs operating securities settlement systems across the EU. The CSDR plays a pivotal role for post-trade harmonisation efforts in Europe, as it will enhance the legal and operational conditions for cross-border settlement in the EU.
- Draft technical standards on settlement discipline, CSD requirements, and internalised settlement
ESMA is consulting on draft technical standards on proposed rules covering settlement discipline measures, the authorisation, recognition, supervision of CSDs, organisational and prudential requirements for CSDs, access requirements (between a CSD and its participants, by issuers to CSDs, between CSDs, and between CSDs and other market infrastructures), as well as internalised settlement reporting (covering securities transactions settled outside a securities settlement system).
- Draft technical advice on penalties for settlement fails and on the substantial importance of a CSD
The second Consultation Paper includes draft technical advice on proposed penalties for settlement fails, and arrangements to identify CSDs of substantial importance for the functioning of the securities markets and the protection of the investors in a host Member State. The proposed level of penalties is based on average borrowing costs for the relevant securities. ESMA’s advice proposes indicators to assess the substantial importance based on the core services offered by a CSD.
- Draft guidelines on the access to CCPs or trading venues by CSDs
The third Consultation Paper of ESMA’s CSDR package consists of draft guidelines on access to a central counterparty (CCP) or a trading venue by a CSD. The consultation covers the risks to be taken into account by a CCP or a trading venue when carrying out a comprehensive risk assessment following a request for access by a CSD, as well as when the competent authority of the CCP or the competent authority of the trading venue assesses the reasons for refusal to grant access to a CSD by the CCP or by the trading venue.
Next steps
This represents the second consultation on ESMA technical standards under the CSDR, following the Discussion Paper published on 20 March 2014. ESMA intends to organise an open hearing on the CSDR consultation papers at ESMA premises on 13 January 2015.
moreESMA adds Holland Clearing House BV to list of authorised CCPs under EMIR
ESMA has today added the Holland Clearing House B.V. to its list of authorised CCPs under the European Markets Infrastructure Regualtion (EMIR). EMIR requires EU-based CCPs to be authorised and non-EU CCPs to be recognised in the European Union (EU).
The updated list of registered CCPs and the public register of cleared derivative classes is available on ESMA’s website.
moreESMA to cooperate with Australian regulators on CCPs
The European Securities and Markets Authority (ESMA), the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) have concluded a Memorandum of Understanding (MoU). The MoU establishes cooperation arrangements between the signatory authorities regarding Central Counterparties (CCPs) that are established in Australia and have applied for recognition under EMIR. The MoU is effective as of 27 November 2014.
This MoU is established under the European Markets Infrastructure Regulation (EMIR). EMIR provides for cooperation arrangements to be established between ESMA and non-EU authorities whose legal and supervisory framework for CCPs have been deemed equivalent to EMIR by the European Commission.
ESMA is working closely with other third-country authorities on similar cooperation arrangements.
moreESMA and Australian Securities and Investments Commission (ASIC) sign MoU on trade repository data
The European Securities and Markets Authority (ESMA) and the Australian Securities and Investments Commission (ASIC) have concluded a Memorandum of Understanding (MoU) on access to data held in European trade repositories. The MoU is effective as of 26 November 2014.
The ESMA-ASIC MoU is the first cooperation arrangement established under the European Markets Infrastructure Regulation (EMIR). EMIR provides the possibility for non-EU regulators that do not have any trade repository in their jurisdiction, to access data on derivatives contracts held in European trade repositories which is relevant for their supervisory tasks. The MoU ensures professional secrecy exists.
ESMA is working closely with other third-country authorities on similar cooperation arrangements.
moreEMIR clearing obligation delay
The European Securities and Markets Authority (ESMA) has today published a letter it has sent to the European Commission concerning the delivery of its upcoming regulatory technical standards defining the clearing obligation under the European Markets Infrastructure Regulation (EMIR).
As the EC is assessing certain aspects of the first RTS on OTC interest rate derivatives that could affect the similar content of the second subsequent on OTC interest rate derivatives , ESMA will hold the delivery of the forthcoming draft RTS on the clearing obligation until the assessment process is finalized.
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