Recent regulatory developments of interest to financial institutions and markets. Includes updates from the UK FCA, the European Commission, ESMA and IOSCO, among others. Also check our Related Materials links.

Contents

• UK SSR: Short Selling (Notification Thresholds) Regulations 2021
• UK MiFIR: Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021
• UK MiFIR: FCA uses TTP for derivatives trading obligation to mitigate disruption
• COVID-19: FCA update for revised expectations on market trading and reporting
• FCA Market Watch issue 66
• UK Listing Rules climate-related disclosures: FCA PS20/17 and technical note
• EMIR 2.2: HM Treasury letter
• EMIR: BoE and ESMA MoUs on recognition of UK CCPs and CSDs
• EMIR: Delegated Regulation amending RTS on CCP colleges
• EMIR: Corrigendum to Delegated Regulation supplementing EMIR on rules of procedure for penalties imposed on trade repositories by ESMA
• EMIR: European Commission adopts Delegated Regulations on clearing obligation and risk mitigation
• End of Brexit transition period: ESMA reminder to firms on MiFID reverse solicitations
• End of Brexit transition period: ESMA statement about UK-based CRAs and TRs
• EMIR REFIT: ESMA final report on technical standards on reporting, data quality, data access and registration of TRs
• EMIR: ESMA second report on clearing solutions for pension scheme arrangements
• EMIR: ESMA updates Q&As
• EMIR: ESMA and CFTC enter enhanced MoU relating to certain CCPs
• MiFIR: European Commission adopts Delegated Regulation on liquidity thresholds and trade percentiles used to determine SSTI applicable to non-equity instruments
• MiFID: ESMA updates Q&As on investor protection and intermediaries
• MiFIR: ESMA updates opinion on assessment of pre-trade transparency waivers
• MiFID: ESMA consults on impact of algorithmic trading
• MiFIR: ESMA consults on technical advice on penalties imposed on DRSPs
• CSDR: ECSDA updates settlement fail penalties framework
• SFTR: ESMA updated guidelines on reporting
• FX settlement risk: BCBS and CPMI letter
• MAR: ESMA annual report on sanctions and measures
• MAR: ESMA annual report on application of accepted market practices
• BMR: ESMA consults on procedural rules for penalties imposed on benchmark administrators
• Exchange traded funds: IOSCO industry survey
• COVID-19 impact on retail market conduct: IOSCO report
• COVID-19 and CCP risk management frameworks: ISDA paper

UK SSR: Short Selling (Notification Thresholds) Regulations 2021

The Short Selling (Notification Thresholds) Regulations 2021 (SI 2021/5) have been published, together with an explanatory memorandum. The Regulations were made on 6 January 2021 under Article 5(4) of the retained EU law version of the Short Selling Regulation (UK SSR). They amend Article 5(2) of the UK SSR by lowering the initial notification threshold for the reporting of net short positions to the Financial Conduct Authority (FCA) relating to the issued share capital of a company that has shares admitted to trading on a trading venue, from 0.2% to 0.1%. This change will ensure that the FCA has the necessary data to effectively monitor short selling activity at a time of increased market volatility and act earlier against any disruptive short selling activity.

The explanatory memorandum notes that the amended threshold will result in the UK requirements differing from the EU requirements. In the UK, the 0.1% threshold will apply in respect of shares admitted to trading on UK regulated markets and UK multilateral trading facilities (MTFs), whereas in the EU the 0.1% threshold applies only in respect of shares admitted to trading on EU regulated markets. The government has taken this approach following engagement with reporting persons by the FCA. This demonstrated that applying the 0.1% threshold to regulated markets and MTFs would result in a simpler, less burdensome regime.

The lower threshold takes effect from 1 February 2021, when the Regulations come into force, and will apply indefinitely. In the interim period, between the end of the transition period and 1 February 2021, notifications can be made to the FCA at the 0.1% threshold if reporting persons wish to do so.

HM Treasury and the FCA will continue to monitor whether the notification threshold remains appropriate given market conditions.

UK MiFIR: Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021

The Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021 (SI 2021/28) have been published, together with an explanatory memorandum.

The Regulations have been made to specify that the legal and supervisory framework for stock exchanges in Switzerland meet at least equivalent outcomes to the UK's corresponding regime. The Regulations will allow all investment firms, which are subject to the trading obligation set out in Article 23(1) of the retained EU law version of the Markets in Financial Instruments Regulation (UK MiFIR), to trade shares that fall within scope of the share trading obligation on Swiss trading venues that have been recognised as equivalent (that is, BX Swiss AG and SIX Swiss Exchange AG).

The Regulations were laid before Parliament on 13 January 2021 and will come into force on 3 February 2021.

UK MiFIR: FCA uses TTP for derivatives trading obligation to mitigate disruption

The FCA has published a statement on the use of its temporary transitional power (TTP) to modify the UK's derivatives trading obligation (DTO).

In its statement, the FCA notes that the UK has onshored the Markets in Financial Instruments Regulation (MiFIR) DTO under the EU Withdrawal Act 2020 (EUWA) and that the UK DTO applies to the same classes of derivatives as the EU DTO. The FCA welcomes the UK and EU agreeing a Trade and Cooperation Agreement and the associated Joint Declaration on financial services regulatory cooperation.

The FCA continues to believe that the agreement of mutual equivalence between the UK and EU is the best way of avoiding disruption for market participants and fragmentation of liquidity in DTO products, reducing costs for investors. Without mutual equivalence, some firms, in particular the branches of EU firms in London, will be caught by a conflict of law between the EU and UK DTOs. Therefore, in the absence of a coordinated solution, the FCA is using its TTP to modify the application of the UK DTO and has published the relevant transitional direction and explanatory note.

Under the FCA's modification, where firms subject to the UK DTO trade with, or on behalf of, EU clients that are subject to the EU DTO, they will be able to transact or execute those trades on EU venues provided that:

• firms take reasonable steps to be satisfied the client does not have arrangements in place to execute the trade on a trading venue to which both the UK and EU have granted equivalence; and
• the EU venue has the necessary regulatory status to do business in the UK – such venues include Recognised Overseas Investment Exchanges and those that have been granted the relevant temporary permission or are certain they benefit from the overseas person exclusion.

The modification applies to UK firms, EU firms using the UK's temporary permissions regime, and branches of overseas firms in the UK. Transactions concluded by an EEA UCITS fund or an EEA alternative investment fund are currently outside the scope of the UK DTO.

The modification does not apply to trades with non-EU clients, proprietary trading conducted, for example, to hedge a firm's own risk exposure, and trades between UK branches of EU firms. These trades remain subject to the UK DTO.

The FCA expects firms to be able to demonstrate they are taking all reasonable steps during Q1 2021 to ensure compliance with the UK DTO.

The transitional direction came into force at the end of the transition period on 31 December 2020. The FCA states that it will consider by 31 March 2021 whether market or regulatory developments warrant a review of its approach. The FCA remains open to cooperation with EU authorities on ways of avoiding conflicting obligations.

COVID-19: FCA update for revised expectations on market trading and reporting

On 8 January 2021, the FCA published an updated version of its webpage providing information for firms on COVID-19. The FCA has updated its section on market trading and reporting in the light of the extensive duration of working from home arrangements in response to COVID-19.

The FCA states that it now expects firms to ensure that all relevant communications (including voice calls) are recorded when working outside the office. The FCA previously accepted that it might on some occasions not be possible to record calls, and instructed firms to inform it if they were unable to meet its requirements.

Firms are required to continue to take all steps to prevent market abuse risks and to submit regulatory data without undue delay. The FCA previously accepted that firms may experience difficulties in submitting their regulatory data, in which case they should maintain appropriate records and submit the data as soon as possible.

The FCA advises any firms that have further concerns about their ability to meet its obligations due to the pandemic to contact it via their regular supervisory channels as soon as possible. It will provide any further updates on its expectations of market participants, including listed issuers, through its usual communication channels, including supervisory communications, Market Watch and Primary Market Bulletin publications.

FCA Market Watch issue 66

The FCA has published issue 66 of Market Watch, its newsletter on market conduct and transaction reporting issues. Issue 66 sets out the FCA's expectations for firms on recording telephone conversations and electronic communications when alternative working arrangements are in place, including increased homeworking.

UK Listing Rules climate-related disclosures: FCA PS20/17 and technical note

Following its consultation in CP20/3, the FCA has published a policy statement, PS20/17, which contains the feedback to its consultation and final rules and guidance which requires commercial companies with a UK premium listing to include a compliance statement in their annual financial report on whether they have made disclosures consistent with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) or providing an explanation if they have not done so.

The amendments to the Handbook came into force on 21 December and apply for accounting periods beginning on or after 1 January 2021, meaning the first annual financial reports subject to the rule would then be published in spring 2022.

PS20/17 includes a technical note which clarifies existing disclosure obligations in EU legislation and the FCA Handbook. The technical note applies with immediate effect.

Premium listed companies directly impacted by the new rule should familiarise themselves with the details of the rule and associated guidance, and consider the arrangements they need to put in place to ensure they can meet the requirements of the rule.

Relevant issuers should familiarise themselves with the content of the Technical Note and consider where they may already be required to disclose information on climate-related and other ESG matters under the relevant rules and legislative provisions.

The FCA plans to issue a follow up consultation paper in Q1 2021 on proposals to extend the application of its rule to a wider scope of listed issuers. It will also consider consulting on strengthening the compliance basis.

BEIS plans to consult early in 2021 on TCFD-aligned disclosure obligations in the Companies Act 2006 for certain UK-registered companies. This may include some commercial companies with a UK premium listing or standard listing and the FCA will continue to engage with this work to ensure that the regimes operate in a coherent and complementary way.

The FCA states that it will set out further information on its supervisory approach to the new listing rule in a Primary Market Bulletin in late 2021. Also, in the first half of 2021, it plans to consult on potential client-focused TCFD-aligned disclosures by UK-authorised asset managers, life insurers and FCA-regulated pension providers.

The FCA intends to continue to work with the government and other UK regulators, international partners, the IFRS Foundation and industry to drive progress towards an international standard for sustainability reporting.

EMIR 2.2: HM Treasury letter

HM Treasury has published a letter (dated 11 January 2021) from John Glen, Economic Secretary to HM Treasury, sent to Lord Kinnoull, House of Lords European Union Committee Chair clarifying certain aspects of EMIR 2.2. The letter is in response to questions raised in a letter (dated 10 December 2020) from the Committee to HM Treasury. The response includes information relating to:

• changes to delegated acts on central counterparty (CCP) recognition;
• impact on comparable compliance; and
• supervisory cooperation between the Bank of England and the European Securities and Markets Authority (ESMA).

EMIR: BoE and ESMA MoUs on recognition of UK CCPs and CSDs

ESMA has published the following memoranda of understanding (MoU) that it and the Bank of England (BoE) have agreed on the recognition of UK CCPs and central securities depositories (CSDs):

• arrangements for cooperation on the monitoring and supervision of CCPs established in the UK; and
• monitoring the ongoing compliance with recognition conditions by CSDs established in the UK.

The CCP MoU provides for the cooperation arrangements required as a condition of recognition by ESMA for a third-country CCP under Article 25(7) of EMIR and to provide the BoE and ESMA with tools to monitor the regulatory and supervisory developments in the EU and UK, and the ongoing compliance of CCPs established in the UK with recognition conditions.

The CSD MoU aims to meet the condition contained in Article 25(4)(c) of the CSD Regulation (CSDR), that is, that cooperation arrangements have been established about covered CSDs. It also provides ESMA with tools to monitor the ongoing compliance by covered CSDs with recognition conditions.

Both MoUs entered effect following the end of the Brexit transition period.

EMIR: Delegated Regulation amending RTS on CCP colleges

Commission Delegated Regulation (EU) 2020/2145, amending Commission Delegated Regulation (EU) 876/2013, which contains regulatory technical standards (RTS) supplementing EMIR on CCP colleges, has been published in the Official Journal of the EU (OJ). The revisions to the RTS reflect changes to Article 18(6) of EMIR introduced by EMIR 2.2, which came into force on 1 January 2020.

The Delegated Regulation will enter into force and apply on 7 January 2021.

EMIR: Corrigendum to Delegated Regulation supplementing EMIR on rules of procedure for penalties imposed on trade repositories by ESMA

A corrigendum to Commission Delegated Regulation (EU) No 667/2014 supplementing EMIR with regard to rules of procedure for penalties imposed on trade repositories by ESMA has been published in the OJ. The corrigendum amends Articles 6(5) and 7(5) of the Delegated Regulation to replace references to Article 58 of the ESMA Regulation (Regulation 1095/2020) with references to Article 60 of the ESMA Regulation.

EMIR: European Commission adopts Delegated Regulations on clearing obligation and risk mitigation

The European Commission has adopted the following two Delegated Regulations made under EMIR:

• a Delegated Regulation amending RTS laid down in Commission Delegated Regulation (EU) 2016/2251 as regards to the timing of when certain risk management procedures will start to apply for the purpose of the exchange of collateral; and
• a Delegated Regulation amending RTS laid down in Commission Delegated Regulations (EU) 2015/2205, (EU) 2016/592 and (EU) 2016/1178 as regards the date at which the clearing obligation takes effect for certain types of contracts.

The next step is for the Council of the EU and the European Parliament to consider the Delegated Regulations. If neither the Council or the Parliament object, the Delegated Regulations will be published in the OJ and enter into force the following day.

End of Brexit transition period: ESMA reminder to firms on MiFID reverse solicitations

ESMA has published a statement reminding firms of the requirements under the Markets in Financial Instruments Directive (MiFID) concerning the provision of investments services to retail or professional clients by firms not established or situated in the EU.

Under Article 42 of MiFID II, where a retail client or professional client established or situated in the EU initiates, at its own exclusive initiative, the provision of an investment service or activity by a third-country firm, the third-country firm is not subject to the requirements relating to establishing a branch under Article 39 of MiFID.

ESMA reminds firms that it has already provided guidance to firms (in its Q&A on MiFID and MiFIR investor protection and intermediaries topics) on the application of the MiFID requirements for the provision of investment services and activities by third country firms, including how the notion of a client initiating "at its own exclusive initiative the provision of an investment service or activity by a third-country firm" should be understood and applied.

However, following the end of the Brexit transition period on 31 December 2020, ESMA notes that some questionable practices by firms around reverse solicitation have emerged. For example, some firms appear to be trying to circumvent MiFID requirements by including general clauses in their terms of business, or using online pop-up "I agree" boxes, where clients state that any transaction is executed on the exclusive initiative of the client.

Among other things, ESMA reminds firms of recital 111 of MiFID, which provides guidance on what "own exclusive initiative of the client" means. In addition, it reminds firms that every communication means used, such as press releases, advertising on the internet or phone calls, should be considered in determining if the client, or potential client, has been subject to any solicitation, promotion or advertising in the EU on the firm's investment services or activities or on financial instruments.

ESMA highlights that:

• the provision of investment services in the EU, without proper authorisation in accordance with the EU and the national law applicable in member states, exposes service providers to the risk of administrative or criminal proceedings for the application of relevant sanctions; and
• when using the services of investment service providers that are not properly authorised in accordance with EU and member states' law, investors may lose protections granted to them under EU relevant rules. This includes coverage under the investor compensation schemes in accordance with the Investor Compensation Schemes Directive.

End of Brexit transition period: ESMA statement about UK-based CRAs and TRs

ESMA has published a press release explaining that it has withdrawn the registrations of six UK-based credit rating agencies (CRAs) and four trade repositories (TRs) as a result of the end of the Brexit transition period. The registrations have been withdrawn as the firms no longer meet the conditions under which they were registered, that is, being a legal person established in the EU.

Consequentially, ESMA explains:

• the ratings issued by the affected CRAs cannot be used for regulatory purposes in the EU unless endorsed by an EU CRA (under the Credit Rating Agencies Regulation). ESMA confirmed in an October 2020 statement that all UK-based CRAs except the Economist Intelligence Unit Ltd took steps to ensure that an EU CRA is willing and able to endorse its credit ratings; and
• as a result of these withdrawal decisions, EU derivatives and securities financing transactions subject to the reporting obligation under the Regulation on OTC derivative transactions, central counterparties and trade repositories (EMIR) and the Regulation on reporting and transparency of securities financing transactions (SFTR) can no longer be reported to any of the TRs, but need to be reported to an EU-established TR. An updated list of available TRs is available on an ESMA webpage.

EMIR REFIT: ESMA final report on technical standards on reporting, data quality, data access and registration of TRs

ESMA has published a final report on regulatory technical standards (RTS) and implementing technical standards (ITS) on reporting requirements, procedures to reconcile and validate the data, and amendments to the technical standards on registration of and access to TRs by the relevant authorities under the EMIR Refit Regulation (EMIR REFIT).

ESMA sets out the following RTS and ITS in annexes to the final report:

• draft RTS on details of the reports to be reported to TRs under EMIR;
• draft ITS own standards, formats, frequency and methods and arrangements for reporting to TRs under EMIR;
• RTS on registration and extension of registration of TRs under EMIR;
• ITS on registration and extension of registration of TRs under EMIR;
• RTS on procedures for ensuring data quality; and
• RTS on operational standards for aggregation and comparison of data and on terms and conditions for granting access to data.
• ESMA has submitted the draft technical standards to the European Commission for endorsement. The Commission must decide whether to endorse the draft technical standards within three months or inform the European Parliament and the Council of the EU where the adoption cannot take place within the three-month period. Following the entry into force of the technical standards, ESMA proposes an 18-month implementation period.

EMIR: ESMA second report on clearing solutions for pension scheme arrangements

ESMA has submitted its second report on clearing solutions for pension scheme arrangements (PSAs) under EMIR to the European Commission.

One of the amendments to EMIR under EMIR REFIT was a further extension of the exemption from the clearing obligation for PSAs until June 2021, potentially to be extended by another year or two. The extension was introduced because of the challenges that PSAs would face to provide cash for the variation margin calls related to their cleared derivative contracts. To monitor the progress made by the different parties involved towards possible clearing solutions for PSAs by June 2021, ESMA was mandated, if the exemption still applies, to draft an annual report as input to the European Commission's report on the clearing solutions for PSAs.

ESMA states that, as detailed in its second report, it seems very unlikely that after the efforts from all stakeholders and regulators since the start of the exemption, a new and never thought of "silver bullet" solution will emerge. This also means that the solution towards which ESMA is moving seems to be the optimisation by different parties (regulators, CCPs, clearing members and their clients) of already existing solutions. Although some of these existing solutions need to be further developed, or might need regulatory consideration, their addition should provide the conditions for PSAs to be able to clear and meet variation margin calls in all states of the market that have been considered.

ESMA is of the view that more time is needed to make enough progress with the implementation of a mixture of solutions. Therefore, it states that an extension of one year by the Commission of the temporary exemption, as provided for in the EMIR REFIT, would be beneficial.

EMIR: ESMA updates Q&As

ESMA has published an updated version of its Q&As on the implementation of EMIR. Part I (OTC derivatives) has been updated to clarify the status, after the Brexit transition period, of legacy derivative transactions executed on UK markets. This is relevant for EU CCPs to determine applicable EMIR requirements, and for position calculations against clearing thresholds.

In addition, Part IV (reporting to trade repositories (TRs): transaction scenarios) and Part V (reporting to TRs: exchange-traded derivative (ETD) contracts reporting) have been amended to clarify the reporting technique for derivatives executed on a third-country venue and cleared on the same day.

EMIR: ESMA and CFTC enter enhanced MoU relating to certain CCPs

ESMA and the US Commodity Futures Trading Commission (CFTC) have entered into an enhanced memorandum of understanding (MoU) regarding cooperation and the exchange of information with respect to certain registered derivatives clearing organisations established in the US that are CCPs recognised by ESMA under EMIR.

MiFIR: European Commission adopts Delegated Regulation on liquidity thresholds and trade percentiles used to determine SSTI applicable to non-equity instruments

The European Commission has adopted a Delegated Regulation establishing RTS amending Delegated Regulation (EU) 2017/583 (RTS 2) as regards adjustment of liquidity thresholds and trade percentiles used to determine the size specific to the instrument (SSTI) applicable to certain non-equity instruments.

RTS 2 imposes transparency requirements for trading venues and investment firms in respect of bonds, and other non-equity products. In particular, it provides the methodology to assess the liquidity and the SSTI of bonds. Both liquidity and SSTI are relevant for the application of transparency waivers and deferrals under the Markets in Financial Instruments Regulation (MiFIR).

The next step is for the Council of the EU and the European Parliament to consider the Delegated Regulation. If neither the Council nor the Parliament object, the Delegated Regulation will be published in the Official Journal of the EU (OJ) and enter into force on the twentieth day following its publication in the OJ.

MiFID: ESMA updates Q&As on investor protection and intermediaries

ESMA has updated its Q&As on investor protection and intermediaries under MiFID and MiFIR. The updated version includes a new Q&A on information on costs and charges that aim to give guidance on how firms can present ex-post costs and charges information to clients in a fair, clear and not misleading manner.

MiFIR: ESMA updates opinion on assessment of pre-trade transparency waivers

ESMA has published an updated version of its opinion on the assessment of pre-trade transparency waivers for equity and non-equity instruments under the MiFIR. It covers guidance related to request for quote systems, guidance on how trading venues should apply for a waiver to their national competent authority, and updates on frequently encountered issues when assessing waiver notifications.

MiFID: ESMA consults on impact of algorithmic trading

ESMA has published a consultation paper on algorithmic trading to assist the European Commission in producing a report on the impact of requirements relating to algorithmic trading, including high-frequency trading. The Commission is required to present the report to the European Parliament and Council of the EU (after consulting ESMA) under Article 90(1)(c) of MiFID.

The consultation closes on 12 March 2021. Based on responses it receives, ESMA will prepare its final review report for submission to the Commission by July 2021.

MiFIR: ESMA consults on technical advice on penalties imposed on DRSPs

ESMA has published a consultation paper on technical advice on penalties imposed on data reporting services providers (DRSPs).

Regulation (EU) 2019/2175 amended MiFIR to transfer authorisation and supervisory powers relating to most DRSPs from national competent authorities to ESMA from 1 January 2022. Article 38k (10) of MiFIR gives the European Commission the power to adopt a delegated regulation specifying the rules of procedure for the exercise of the power to impose fines or periodic penalty payments and the limitation periods for the imposition and enforcement of fines and periodic penalty payments. In June 2020, the Commission made a call for advice from ESMA, set out in Annex II of the consultation paper, on the drafting of the delegated regulation. In the consultation, ESMA sets out its preferred options for the procedural rules on penalties imposed on DRSPs under its direct supervision.

The deadline for responses is 23 January 2021. ESMA intends to publish a final report and to submit the technical advice to the Commission in Q1 2021.

CSDR: ECSDA updates settlement fail penalties framework

The European Central Securities Depositories Association (ECSDA) has published an updated version of its settlement fail penalties framework. The framework applies to all central securities depositaries (CSDs) subject to the Regulation on improving securities settlement and regulating CSDs (CSDR) or equivalent legislation. It aims to create a harmonised set of rules for the creation and operation of settlement discipline cash penalties mechanisms and constitutes a market practice for CSDs and their participants.

The ECSDA has also published responses to practical questions it has previously asked CSD participants on CSDR cash penalties implementation.

SFTR: ESMA updated guidelines on reporting

ESMA has published an updated version of its guidelines on reporting under Articles 4 and 12 of the Securities Financing Transactions Regulation (SFTR). The corrections that have been made appear to be shown in tracked changes.

FX settlement risk: BCBS and CPMI letter

The Basel Committee on Banking Supervision (BCBS) and the Committee on Payments and Market Infrastructures (CPMI) have published a joint letter to supervisors, banks and other participants on managing foreign exchange (FX) settlement risk.

In the letter, the BCBS and CPMI (the committees) state that they encourage supervisors and participants in the FX market to follow the expectations set out in the BCBS's February 2013 Supervisory Guidance on managing FX settlement risk (BCBS214) and the Global FX Code. They state that where supervisors determine that a bank's management of FX settlement related risks is not adequate, they should take appropriate action to correct the situation.

The committees warn that the 2019 BIS Triennial FX survey indicates that FX settlement risk remains significant and that the proportion of trades with payment-versus-payment (P2P) protection has fallen in recent years. They note that the BCBS guidance recommends eliminating principal risk by using PvP settlement where practicable and, for FX transactions that do not settle via PvP, banks should be encouraged to minimise the size and duration of their principal risk and to conduct timely reconciliation of payments received. To fully address FX settlement-related risks, banks' incentives, business practices and infrastructures must be properly aligned.

The committees have agreed an action plan in response to the Triennial results, involving concerted supervisory action, supplemented with education and improved data and analysis. They also welcome the Global FX Committee's plans to strengthen the guidance on FX settlement risk in its Global FX Code and support plans to collect data to monitor FX settlement risk on a regular basis.

MAR: ESMA annual report on sanctions and measures

ESMA has published its annual report on the administrative and criminal sanctions and other administrative measures issued under the Market Abuse Regulation (MAR). ESMA is required to publish the report under Article 33 of MAR. The report contains:

• aggregated information on the administrative and criminal sanctions and other administrative measures imposed by national competent authorities in accordance with Article 30 of MAR from 1 January 2019 to 31 December 2019; and
• an overview of the applicable legal framework, including the penalties and measures foreseen.

The report also includes, for the last time, information provided by the FCA relating to MAR administrative and criminal sanctions and measures in the UK.

MAR: ESMA annual report on application of accepted market practices

ESMA has published its annual report on the application of accepted market practices (AMPs) under MAR. In the report, produced under Article 13(10) of MAR, ESMA provides an overview of the legislative framework concerning the adoption of AMPs in the EU under MAR, as well as an overview of its opinion on points for convergence relating to MAR AMPs on liquidity contracts. The report also contains information on the legal status of AMPs and provides data on their application in practice, covering the second half of 2019 and the first half of 2020.

BMR: ESMA consults on procedural rules for penalties imposed on benchmark administrators

ESMA has published a consultation paper on procedural rules for penalties imposed on benchmark administrators under the Benchmarks Regulation (BMR). This follows a formal request from the European Commission to ESMA for technical advice to help the Commission formulate a delegated act on procedural rules for benchmark administrators, which will come under ESMA's direct supervision from 1 January 2022.

The consultation paper sets out ESMA's preferred options and invites comments to help with the production of the technical advice. The consultation closes on 23 January 2021. ESMA expects to publish a final report and submit the advice to the Commission in Q1 2021.

Exchange traded funds: IOSCO industry survey

The International Organization of Securities Commissions (IOSCO) published a questionnaire for industry participants on exchange traded funds (ETFs). The voluntary survey is directed specifically at asset managers (Part A), and liquidity providers and market makers (Part B). Its purpose is to support IOSCO's ongoing ETF project by enhancing its understanding of certain aspects of ETFs, including during the market volatility in March/April 2020 due to the COVID-19 pandemic and issues related to fixed-income ETFs.

IOSCO will consider the survey responses when formulating any potential guidance regarding ETFs in the future. The results of the survey will also help inform IOSCO's findings and policy analysis to date for a future report on ETFs to the IOSCO board.

The deadline for responses is 1 March 2021.

COVID-19 impact on retail market conduct: IOSCO report

On 22 December 2020, IOSCO published a report, prepared by its Retail Market Conduct Task Force (RMCTF), on the impact of COVID-19 on retail market conduct.

The RMCTF analysed a number of case studies received from IOSCO members to form the basis of the report, focusing on market environment, key drivers of firm and investor behaviour in periods of stress that provide increased opportunities for retail misconduct, and regulatory measures and tools used to address retail losses or mitigate misconduct risks. It has distilled these into practical findings and observations relating to the vulnerabilities demonstrated by retail investors, the changes exhibited in firms' behaviour and the responses by regulators.

The report also contains a suggested toolkit for regulators facing shifting priorities during stressed conditions, such as the pandemic. It states that regulators may tailor the toolkit to the specific circumstances of their respective markets and jurisdictions.

The RMCTF will continue to monitor trends arising from its members' experiences and will continue its work to support regulators in their efforts to address retail market conduct issues and to protect investors during and beyond the COVID-19 pandemic.

COVID-19 and CCP risk management frameworks: ISDA paper

The International Swaps and Derivatives Association (ISDA) has published a paper setting out the results of an analysis conducted by its Clearing Member Committee regarding how CCP risk management frameworks reacted to the COVID-19 pandemic, based on feedback from CCPs.

In brief, ISDA states that the results show CCPs dealt with the crisis well, managing record volumes while most of their staff worked from home. In total, there were three member defaults or close-outs, none of which threatened financial stability. This reflects a more stable financial system overall: clearing members are much better capitalised and hold more liquidity compared to the last crisis.

However, some issues did emerge. Procyclical initial margin requirements exacerbated market stress at certain points. Clearing members also lacked timely information about back testing breaches and procyclicality in margin models.

The paper makes recommendations to address both of those points.

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