Investment Funds Update - Europe: Legal and regulatory updates for the funds industry from the key asset management centres and primary European fund domiciles - December 2015 - Issue 11: European Legal Developments

by Dechert LLP
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EMIR – CCP List Updated and Equivalence Decisions Reached, Central Clearing for Norwegian, Polish and Swedish Interest Rate swaps, Though no Exemption for Collateralisation of Bank Guarantees for Energy Derivative

Updated CCP List

ESMA updated its list of authorised CCPs, adding CME Clearing Europe on 4 November 2015. 

The European Commission adopted equivalence decisions for CCPs in Canada, Switzerland, South Africa, Mexico and the Republic of Korea on 13 November 2015, meaning market participants will be able to use them to clear standardised over-the-counter derivative trades, while these CCPs will remain subject solely to the regulation and supervision of their home jurisdictions.

Interest Rate Swap Clearing

ESMA published its final report setting out draft technical standards for clearing Norwegian, Polish and Swedish interest rate swaps on 10 November 2015, meaning that central clearing for interest rate swaps in those currencies is expected to start in Q2 2016.

Read the press release 'ESMA Proposes Central Clearing for Norwegian, Polish and Swedish Interest Rate Swaps'

Non-Collateralised Bank Gurantees

ESMA confirmed that it will not extend the existing grace period of three years for non-financial firms’ use of non-collateralised bank guarantees to cover transactions in energy derivatives cleared by European CCPs on 19 November 2015. 

Read the press release 'ESMA Will Not Exempt the Collateralisation of Bank Guarantees for Energy Derivatives Under EMIR'

Capital Markets Union – Further Endorsement from European Council

On 10 November, the European Council formally endorsed the European Commission’s action plan on building a Capital Markets Union.

MiFID II Implementation

Steven Maijoor, ESMA chair, confirmed to the European Parliament on 10 November 2015 that he had raised with the European Commission whether uncertainty over the content of MiFID II’s regulatory technical standard would need a legislative response delaying certain parts of MIFID II, mainly related to transparency, transaction and position reporting.

Read the press release 'ESMA Chair's Statement to the ECON Committee Scrutiny Hearing on MiFID II'

ESMA published its correspondence with the European Commission on 17 November 2015, highlighting its concerns regarding meeting the MiFID II implementation date of 3 January 2017, specifically in respect of reference data, transaction reporting, transparency parameters and position reporting.

The European Parliament issued a press release on 27 November 2015, confirming that it had informed the European Commission that it would be willing to accept a one-year delay of the entry into force of MiFID II. The position on a delay is expected to be clarified mid December.

Indirect Clearing Consultation

ESMA launched a consultation on indirect clearing arrangements under EMIR and MiFIR on 5 November 2015. Indirect clearing is in practice understood as when clients of a clearing member sign up clients of their own.

ESMA’s draft rules cover arrangements for OTC derivatives and exchange-traded derivatives.

Read the press release 'ESMA Consults on Indirect Clearing Arrangements'

Complex Debt Instruments and Structured Deposits Under MiFID II

ESMA published its final report on guidelines on complex debt instruments and structured deposits under MiFID II on 26 November 2015. 

Read the press release 'ESMA Publishes Final Report on Guidelines on Complex Debt Instruments and Structured Deposits in MiFID II'

Other EU Developments – Deal Reached on Benchmark Regulation and Revisions to Prospectus Directive


Benchmark Regulation

The European Commission and the Luxembourg Presidency reached agreement with the European Parliament on the Benchmarks Regulation on 25 November 2015. A benchmark is an index or indicator used to price financial instruments and financial contracts or to measure the performance of an investment fund.

The new rules will reduce the risk of manipulation by ensuring that benchmark providers in the EU have prior authorisation and are subject to proper supervision.

Prospectus Directive

The European Commission confirmed on November 30 2015, the intention to revise the Prospectus Directive to exempt smaller capital raisings and creating a lighter prospectus for smaller companies.

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