ESMA Comments on MiFID II Implementing Measures
On June 16, 2015, the European Securities and Markets Authority (ESMA) published a statement by on its work on implementing measures under MiFID II (Directive 2014/65/EU) and MiFIR (Regulation 600/2014).
The statement explains that the following three areas are receiving the most attention from stakeholders:
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Non-equity transparency. ESMA acknowledges that it will not be able to find the ideal system that perfectly balances transparency and liquidity and that will satisfy the preferences of all market participants. However, ESMA is trying to find reasonable and workable compromises and it is ready to look at the non-equity rules again, once they are in operation, to react to potential deficiencies. ESMA is also thinking about a more flexible system that better reflects market developments and that can be based on better quality data. ESMA's approach on bond market transparency is likely to look different to the position consulted on.
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Position limits. The range of contracts captured varies from highly liquid to completely illiquid. This wide variation implies that ESMA has to be cautious and that a one-size-fits-all approach cannot be the solution.
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Ancillary activity. There will be "major refinements" in ESMA's proposal compared to the text that was consulted on in relation to the test of whether non-investment firms perform investment services as an ancillary activity to their main business.
ECON Adopts Resolution on CMU
On June 16, 2015, the European Parliament published a press release announcing that its Economic and Monetary Affairs Committee (ECON) has adopted a resolution on the capital markets union (CMU).
The adopted resolution has not yet been published, although the press release highlights:
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ECON wants to see a balanced approach towards the CMU, with non-bank sources of finance being developed.
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The need for effective cross-border insolvency rules needs to be addressed.
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Possible changes and additions to the existing regulatory regime should aim at removing entry barriers for small and medium-sized enterprises (SMEs).
EBA 2014 Annual Report
On June 15, 2015, the European Banking Authority (EBA) published its annual report for 2014.
The report provides an overview of the EBA's activities and achievements in 2014, including the development of the single rulebook in banking, the continued promotion of supervisory convergence and the assessment of risks, as well as continued work to increase transparency within the EU banking sector.
ISDA Publishes EMIR Frontloading Additional Termination Event Amendment Agreement
On June 12, 2015, ISDA published its EMIR Frontloading Additional Termination Event Amendment Agreement and an accompanying explanatory memorandum. The amendment agreement allows parties to an ISDA Master Agreement to amend the agreement to incorporate a new additional termination event covering frontloading.
Frontloading refers to the requirement for certain derivative transactions to be cleared in accordance with the clearing obligation under EMIR where the transactions are entered into during a given period before the clearing obligation takes effect. According to ISDA, in such cases, if clearing is not possible by the time the clearing obligation takes effect, the only way the parties can avoid breach of the frontloading requirement (or stop a breach that has occurred from continuing) is to terminate the problem contract. The amendment agreement provides the required termination right, thereby reducing the risk of regulatory breach faced by market participants subject to frontloading.
ISDA Launches BRRD Implementation Monitor
The implementation of the European Bank Recovery and Resolution Directive (BRRD) is currently ongoing in all EU member states, and is at different stages of the respective legislative process. In order to keep track of the status of implementation, ISDA has launched the BRRD Implementation Monitor that covers all EU/EFTA/EEA member states. The BRRD Implementation Monitor has a particular focus on the derivatives-specific provisions, and will be updated on a regular basis to reflect the progress made in each jurisdiction.
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