Recent regulatory developments of interest to financial institutions and markets. Includes various updates relating to EMIR, MiFIR/MiFID, SFTR, CSDR, the Securitisation Regulation and more.

Contents

• EMIR: FCA revises breach notification form
• Brexit: European Commission updates readiness notice for markets in financial instruments and post-trade financial services
• EMIR: European Commission adopts Delegated Regulations on tiering, comparable compliance and fees for third-country CCPs
• MiFIR/MiFID transparency regime: ESMA review reports
• SFTR: ESMA consults on draft guidelines on calculation of positions
• EU-wide CCP stress test: ESMA report
• MiFID: ESMA updates opinion on calculating market size of ancillary activity
• Securitisation Regulation: ESMA guidelines on securitisation repository data completeness and consistency thresholds
• CSDR settlement discipline procedures: AFME guidelines on market practice for bilateral claims
• Participating in sovereign and supranational auctions: FMSB statement of good practice

EMIR: FCA revises breach notification form

The UK Financial Conduct Authority (FCA) has published a revised version of its form for reporting errors or omissions in their trade reports under Article 9 of the European Market Infrastructure Regulation (EMIR) (the EMIR breach notification form). The FCA states that the form has been updated to incorporate changes to the reporting requirements under Articles 9(1a) to 9(1e) of EMIR, as amended by EMIR Refit.

Firms should complete and submit this updated form from 14 July 2020.

Brexit: European Commission updates readiness notice for markets in financial instruments and post-trade financial services

The European Commission has published updated versions of the following Brexit readiness notices:

• Notice to stakeholders: withdrawal of the UK and EU rules in the field of post-trade financial services (covering derivatives, trade repositories and reporting, central securities depositories (CSDs) and securities settlement systems); and
• Notice to stakeholders: withdrawal of the UK and EU rules in the field of markets in financial instruments.

These updates replace the previous versions published in February 2018.

EMIR: European Commission adopts Delegated Regulations on tiering, comparable compliance and fees for third-country CCPs

Following its consultation, the European Commission has adopted Delegated Regulations supplementing EMIR with regard to tiering criteria, comparable compliance and fees charged by the European Securities and Markets Authority (ESMA) to third-country central counterparties (TC-CCPs). The Delegated Regulations reflect changes made to EMIR by EMIR 2.2 and comprise:

• Commission Delegated Regulation supplementing regulation (EU) No 648/2012 with regard to fees charged by the European Securities and Markets Authority to central counterparties established in third countries;
• Commission Delegated Regulation supplementing regulation (EU) No 648/2012 with regard to the criteria that ESMA should take into account to determine whether a central counterparty established in a third-country is systemically important or likely to become systemically important for the financial stability of the Union or of one or more of its Member States; and
• Commission Delegated Regulation supplementing regulation (EU) No 648/2012 with regard to the minimum elements to be assessed by ESMA when assessing third-country CCPs' requests for comparable compliance and the modalities and conditions of that assessment and Annex.

The drafts will now be considered by the Council of the EU and the European Parliament. If neither object, the Delegated Regulations will be published in the Official Journal of the EU (OJ) and enter into force on the day following their publication in the OJ.

Separately, ESMA has written to the Commission to give its feedback and highlight concerns on certain aspects these draft Delegated Regulations.

MiFIR/MiFID transparency regime: ESMA review reports

ESMA has published two final reports reviewing key provisions of the transparency regime under the Markets in Financial Instruments Regulation (MiFIR) and the Markets in Financial Instruments Directive (MiFID):

• MiFID II Directive/MiFIR review report on the transparency regime for equity and equity-like instruments, the double volume cap (DVC) mechanism and the trading obligations for shares: this report reviews the MiFIR transparency regime for equity instruments and contains proposals for targeted amendments regarding the transparency obligations for trading venues and specifically the double volume cap mechanism. It also includes recommendations on other key transparency provisions, in particular the trading obligation for shares and the transparency provisions applicable to systematic internalisers in equity instruments.
• MiFIR report on SIs in non-equity instruments: this report reviews the pre-trade transparency obligations applicable to systematic internalisers in non-equity instruments.

ESMA says that the proposals put forward in both reports take into account feedback from stakeholders and aim to simplify the current complex transparency regime while trying to improve the transparency available.

ESMA has submitted the reports to the Commission and expects that they will be taken into consideration in the context of further legislative proposals.

Alongside the reports, ESMA has also published a timeline of upcoming MiFID II review reports.

SFTR: ESMA consults on draft guidelines on calculation of positions

ESMA is consulting on draft guidelines on the calculation of positions by trade repositories (TRs) under article 4(6) of the Securities Financing Transactions Regulation (SFTR). The aim of the guidelines is to ensure consistency of position calculation across TRs, with regard to the time of calculations, the scope of the data used in calculations, the data preparation, the recordkeeping of data and the calculation methodologies. They cover two main types of aggregation, the named positions between counterparties and the sectorial positions for the purposes of FSB reporting. The guidelines will also ensure a consistent methodology is used under EMIR and the SFTR, while still reflecting the specificities of SFT reporting.

The consultation ends on 15 September 2020. ESMA aims to finalise the proposed guidelines and publish a final report in Q4 2020 to Q1 2021.

EU-wide CCP stress test: ESMA report

ESMA has published a report on the results of its third EU-wide stress test for CCPs, launched in April 2020. The purpose of the exercise was to assess the resilience of European CCPs against adverse market developments. It covered 16 CCPs, including all authorised EU CCPs and the three UK CCPs (LCH Ltd, ICE Clear Europe Ltd and LME Clear Ltd).

ESMA concludes that that EU CCPs are overall resilient to common shocks and multiple defaults. It also notes that the COVID-19 pandemic led to sharp and extreme market movements for instruments across the majority of asset classes and concludes that that EU CCPs remained resilient through the crisis, despite the increased market volatility and operational risk.

MiFID: ESMA updates opinion on calculating market size of ancillary activity

ESMA has updated, for the year 2019, its opinion on ancillary activity calculations under MiFID.

Article 2(1)(j) of MiFID provides an exemption from its scope for persons dealing on own account or providing investment services in specific cases, including where their activity is an ancillary activity to their main business (provided certain conditions are met). Commission Delegated Regulation (EU) 2017/592 further specifies the criteria for establishing when an activity is to be considered as ancillary for this purpose. In particular, it lays down rules for calculating the overall market trading activity, which ultimately determines whether an activity is ancillary and, as a consequence, whether a market participant falls within the scope of MiFID.

In the updated opinion, ESMA provides the estimation of the market size of various commodity derivatives, including metals, oil and coal, as well as emission allowances for 2019. ESMA has prepared the estimations based on data collected from trading venues and data reported to trade repositories under EMIR.

Securitisation Regulation: ESMA guidelines on securitisation repository data completeness and consistency thresholds

ESMA has published a final report containing feedback on its consultation and guidelines on securitisation repository data completeness and consistency thresholds under the Securitisation Regulation. Following feedback from its earlier consultation, ESMA has further developed and clarified some requirements in the guidelines.

The guidelines will be translated into the official EU languages and published on ESMA's website. ESMA will consider the guidelines for the purpose of its supervision as of 1 January 2021. Securitisation repositories will not be required to report whether they comply with these guidelines.

CSDR settlement discipline procedures: AFME guidelines on market practice for bilateral claims

The Association for Financial Markets in Europe (AFME) has published a document setting out market practice guidelines for AFME members to handle bilateral claims between trading counterparties, related to penalties applied under the Central Securities Depositories Regulation (CSDR) on failed settlement instructions.

The document has been created collaboratively by AFME members and is subject to change. They should be applied from the date of entry into force of the CSDR settlement discipline regime, which is expected to be 1 February 2021.

The document is intended as a recommendation only and adoption by any market participant is on a strictly voluntary basis.

Participating in sovereign and supranational auctions: FMSB statement of good practice

The FICC Markets Standards Board (FMSB) has published a statement of good practice for participation in sovereign and supranational auctions in fixed income markets.

The statement describes the way in which sovereign and supranational auctions are typically conducted in Europe, the roles market participants in those auctions play, the types of auction structure, orders and transaction types, and the different conflicts of interest that can arise.

It then sets out eight good practice statements for firms to consider when participating in these markets. They address issues such as:

• identifying, preventing or managing conflicts of interest in auctions;
• improper influence or manipulation of auctions or statistics;
• disclosure of information to investor clients;
• confidentiality of investor client information and
• development of policies, procedures, guidance and training.

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