Investment Funds Update: Europe: Legal and regulatory updates for the funds industry from the key asset management centres and primary European fund domiciles - Issue 5, 2017: European Union Developments

by Dechert LLP

Dechert LLP

EMIR - New Third Country CCPs Recognised

ESMA updated its list of third-country central counterparties recognised to offer services and activities in the EU on 29 May 2017 – New Zealand Clearing Ltd may now clear.

View the updated list

Read the associated press release

MiFID II - ESMA Clarifies Meaning of "Traded on a Trading Venue" and Updates Q&A on Market Infrastructure Topics

ESMA issued an opinion on 22 May 2017 clarifying the meaning of “traded on a trading venue” (“TOTV”) in the context of MiFID II obligations applicable to OTC derivatives.

The ESMA opinion clarifies the concept of TOTV for OTC derivatives, and which transactions in derivatives concluded outside of trading venues are subject to MiFID II transaction reporting and transparency requirements.

The opinion specifies that only OTC-derivatives sharing the same reference data details as derivatives for which trading venues submitted reference data should be subject to MiFID II transparency and transaction reporting requirements.

Read the opinion

Read the associated press release

On 31 May, ESMA issued updated Q&As on the following MiFID II topics:

The updated Q&As include new answers regarding:

  • Algorithmic trading
  • The extension of a pre-existing MiFID I waiver to equity-like instruments
  • The systematic internaliser regime
  • Non-equity instruments and data reporting services providers
  • Commodity derivatives

Read the associated press release

ESMA Issues General Principles to Support Supervisory Convergence pre-Brexit and European Parliament Wakes Up to FinTech

ESMA issued an opinion on 31 May 2017 to support supervisory convergence in the context of increased requests from UK financial market participants seeking to relocate to the 27 remaining EU member states.

ESMA’s intervention comes after national regulators complained some EU member states could allow the creation of letterbox entities in order to attract UK-based asset managers.

The opinion sets out nine principles:

  1. No automatic recognition of existing authorisations.
  2. Authorisations granted by EU27 national competent authorities should be rigorous and efficient.
  3. National competent authorities should be able to verify the objective reasons for relocation.
  4. Special attention should be granted to avoid letter-box entities in the EU27.
  5. Outsourcing and delegation to third countries is only possible under strict conditions.
  6. National competent authorities should ensure that substance requirements are met.
  7. National competent authorities should ensure sound governance of EU entities.
  8. National competent authorities must be in a position to effectively supervise and enforce Union law.
  9. Effective coordination to ensure effective monitoring by ESMA

Read the opinion

Read the associated press release

On 17 May, the European Parliament passed a resolution of 17 May 2017 attempting to define an EU framework for FinTech and calling for greater regulatory co-operation and oversight.

Read the resolution

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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