European Commission and CFTC Reach Agreement on "Common Path Forward"
On July 11, the European Commission (EC) issued a memorandum announcing its agreement with the United States Commodity Futures Trading Commission (CFTC) relating to their joint understanding on a package of measures for regulating cross-border derivatives.
The agreement acknowledges that as the derivatives market is international, notwithstanding the high degree of similarity between the two jurisdictions' respective requirements, subjecting the global market to "simultaneous application of each other's requirements" could lead to "conflicts of law, inconsistencies and legal uncertainty."
The agreement confirms that the CFTC plans to use non-action relief from certain transaction-based requirements in relation to bilateral uncleared swaps. If the CFTC's trade execution requirement is triggered before March 15, 2004, then the CFTC has agreed to extend appropriate time-limited transitional relief to some EU multilateral trading facilities. The CFTC is also considering extending regulatory relief to trading platforms if they are subject to requirements comparable to those imposed on swap execution facilities.
The EC, CFTC and the European Securities and Markets Authority will continue to work together on further issues including harmonised international rules on margins for uncleared swaps and issues relating to reporting to trade repositories (e.g. data fields, blocking and secrecy laws). CFTC Press Release. European Commission Memorandum.
European Commission Proposes SRM for Banking Union
On July 10, the European Commission published a press release confirming its proposal for a single resolution mechanism (SRM) for the banking union.
While the provisional text for the proposal is available, the EC's website confirms that "the final text will be available soon." The SRM will complement the single supervisory mechanism previously proposed by the EC in September 2012, and it is envisioned that it will centralize certain competences and resources for managing the failure of any bank within the European Area and in any Member State participating in the Bank Union.
The Council of the EU aims to reach an agreement on the SRM by the end of 2013 so that the proposal can be adopted by May 2014 (the end of the current parliamentary term). EC Press Release.
Financial Conduct Authority (FCA) Report on Market Cleanliness
As part of its market monitoring activity reported in its Annual Report published on July 10, the FSA analyzed the scale of share price movements in the two days ahead of regulatory takeover announcements and identified movements that are abnormal compared to a stock's normal movement. The FSA published the statistics annually, and going forward, the FCA remains the only regulator that regularly publishes market cleanliness statistics.
After remaining stable for the four years to 2009, the level of abnormal pre-announcement price movements declined to 21.2% in 2010, 19.8% in 2011 and to 14.9% in 2012. This is the lowest level since 2003. The fall took place in a year of weak takeover activity and against a backdrop of the FSA's continuing focus on market abuse and enforcement activity in this area. FCA Report.
NYSE Euronext to Become New LIBOR Administrator
On July 9, it was announced that NYSE Euronext Rate Administration Ltd, a new subsidiary of NYSE Euronext, will take over the administration of LIBOR from BBA LIBOR Ltd, a subsidiary of the British Bankers' Association (BBA), subject to authorization from the Financial Conduct Authority and following a period of transition. BBA LIBOR Ltd is currently the interim administrator of LIBOR. NYSE Euronext Press Release.