Securities and derivatives: Law-Now alerts, tools and latest news

Law-Now alerts and other tools

Law-Now: “Interim Management Statements to be abolished next year (7/11/13)

Law-Now: “Arbitration for ISDA: a trend for the financial sector?” (13/09/13)

Law-Now: “Likely changes to the Listing Rules requirements for remuneration reports” (5/09/13)

Law-Now: “FCA issues new and amends existing UKLA Procedural Notes including on Block Listings” (12/08/13)

Law-Now: “Prospectus Directive - ESMA report comparing national liability regimes” (26/06/13)

Law-Now: “Ofgem consults on REMIT enforcement regime” (10/06/13)

Law-Now: “Proposed new guidance from the UKLA: Primary Market Bulletin No. 5” (20/03/13)

Law-Now: “EMIR Update - EMIR technical standards adopted by the European Commission” (14/01/13)

Law Now: “Interest Rate Derivative Mis-selling: A new case” (9/01/13)

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Latest news

Topics covered MiFID and securities regulation (inc market abuse and short selling) Clearing and settlement, moving OTC derivatives onto exchange/central counterparties – regulatory “wholesale products” Getting the third pillar to work – active investors and listed company regulation MiFID and securities regulation (inc market abuse and short selling) ESMA: Guidelines on cooperation arrangements and information exchange between competent authorities and between competent authorities and ESMA

These guidelines provide for competent authorities to enter into and comply with the provisions of an MMoU which provides a general framework for cooperation arrangements and information exchange between competent authorities and between competent authorities and ESMA. The guidelines apply from 27 March 2014. (27/03/14) http://www.esma.europa.eu/system/files/2014-298_guidelines_on_cooperation_arrangements_and_information_exchange_0.pdf

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ESMA: Structured retail products - good practices for product governance arrangements

ESMA has published this Opinion which sets out good practices that product providers could put in place to improve their ability to deliver on investor protection, noting that these will “bridge the gap” until the MiFID II product governance requirements are further developed and in place. The good practices cover: general organisation of product governance arrangements; product design; product testing; target market; distributing strategy; value at the date of issuance and transparency of costs; secondary market and redemption; and review process. ESMA suggests that the good practices may also be appropriate where financial instruments are being sold to professional clients and can be used in reference to such instruments asset-backed securities or contingent convertible bonds. (27/03/14) http://www.esma.europa.eu/system/files/2014-332_esma_opinion__structured_retail_products_-_good_practices_for_product_governance_arrangements.pdf

ESMA: Revision of the provisions on diversification of collateral in ESMA’s Guidelines on ETFs and other UCITS issues

Further to its December 2013 consultation, ESMA has published a final report, which sets out its position on collateral management by UCITS. The guidelines in Annex I modify the rules on collateral diversification in paragraph 43(e) of the existing guidelines and introduce some further consequential changes. These will be translated into the official EU languages and published on the ESMA website. The publication of the translations will trigger a two-month period during which national competent authorities must notify ESMA whether they comply or intend to comply with the guidelines. (24/03/14) http://www.esma.europa.eu/system/files/2014-294_final_report_revision_of_guidelines_etfs_and_other_ucits_issues.pdf

ESMA: Definition of “financial instruments” under MiFID

ESMA has published the response received from Michel Barnier in response to its letter of 14 February 2014 regarding the classification of financial instruments as derivatives. (21/03/14) http://www.esma.europa.eu/system/files/ares2014513399_ec_response_on_classification_of_financial_instruments.pdf

ESMA: Authorised CCPs and OTC derivatives

ESMA has announced that it has published information about NASDAQ OMX and the contracts it is authorised to clear. In accordance with the procedure laid out under Article 5(1) of EMIR, on 18 March 2014 ESMA was notified of NASDAQ OMX’s authorisation including the classes of OTC derivatives cleared by them. ESMA will propose draft regulatory technical standards on the clearing obligation if the classes of OTC derivatives notified to ESMA meet the criteria defined in EMIR. (20/03/14) http://www.esma.europa.eu/news/ESMA-publishes-list-authorised-CCPs-and-OTC-derivatives

ESMA: Draft technical standards for the Regulation on improving securities settlement in the European Union and on central securities depositories (CSD)

ESMA has published this discussion paper concerning possible content to draft technical standards on matters such as settlement discipline, CSD registration and requirements, including confirmation rules (acceptance or rejection of terms in good time before the intended settlement date) for trading venues and investment firms, as well as access to CSDs by other CSDs, participants and other market infrastructures. Responses are required by 22 May 2014. (20/03/14) http://www.esma.europa.eu/system/files/2014-299_discussion_paper_on_central_securities_depositories_0.pdf

ESMA: Implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)

ESMA has published a new version of its Q&A document, with new and amended items noted in red. (20/03/14) http://www.esma.europa.eu/system/files/2014-297_qa_vii_on_emir_implementation_20_march_14.pdf

CLLS: EMIR: reporting of derivatives transactions and corporate transactions

CLLS has published a memo which looks at potential legal uncertainties which may arise as to the application of EMIR – and specifically its reporting requirements - to ordinary corporate transactions and arrangements. CLLS suggests that

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these issues arise as EMIR is based on the concept of a derivative under MiFID, and if the wording of that concept is applied literally to ordinary corporate arrangements it may result in unintended consequences. (20/03/14) http://tinyurl.com/n6ettz5

HMT/HMSO: The Budget 2014: Review of loan relationships and derivative contracts legislation

Finance Bill 2014 will include legislation in the following areas: both profits and losses will be brought into account for tax purposes when a group transfers a loan or derivative contract to a company, which subsequently ceases to be a member of the group and changes will be made to the rules in Chapter 3 of Part 6 Corporation Tax Act 2009 with regard to the taxation of certain collective investment vehicles. (19/03/14) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293811/TIIN_5135_modernising_the_taxation_of_corporate_debt_and_derivative_contracts_v1.0_050314_SpAds_MIN_KAI.pdf

ESMA: Trends, risks and vulnerabilities (No. 1 2014)/Risk dashboard for Q4 2013

ESMA has published the first of a series of reports looking at the performance of EU securities markets, assessing both trends and risks. Going forward, ESMA will update its report semi-annually, complemented by the quarterly risk dashboard. Overall, ESMA found that securities markets and investment conditions in the EU improved in the second half of 2013, but overall risks remained at high levels for EU securities markets. The report provides analyses of HFT; structural vulnerabilities due to low interest rates; credit rating agencies and the sector, central securities depositories and stress-testing of investment portfolios: (13/03/14) http://www.esma.europa.eu/system/files/2014-0312_trends_risks_vulnerabilities.pdf http://www.esma.europa.eu/system/files/2014-0197_risk_dashboard.pdf

IOSCO: Comparison and analysis of prudential standards in the securities sector

IOSCO has published this consultation, which seeks to highlight similarities, differences and gaps among the different frameworks for securities commissions. It has the objective of updating IOSCO’s 1989 “Report on capital adequacy standards for securities firms”, based on the issues identified in this consultation. Responses are required by 10 June 2014. (10/03/14) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD438.pdf

FCA: Commodity markets update

This report sets out FCA’s views on the regulatory challenges arising from commodity derivative markets and how it is aiming to address them through its approach to market policy and supervision. FCA notes that “we will continue our intensive supervision of trading platforms and regulated entities active in UK commodity derivative markets, addressing the risks we have identified in this paper. By extension, this will also require continued engagement with a wide range of market participants active in the commodity derivative markets; not just UK-based regulated entities, but also unregulated foreign-based firms, including trading companies” and adds “we will continue to develop our bilateral dialogue with physical regulators, such as Ofgem, given the close inter-dependencies between physical and commodity derivative markets”. (2702/14) http://www.fca.org.uk/static/documents/commodity-market-update-1402.pdf

ESMA: Consolidated registers

ESMA has announced that it has created the above, described as easy-to-use tools listing the information currently published on the websites of the national competent authorities for the securities regulation) of 31 EEA Member States. These provide: a list of investment firms authorised under Article 5 of MiFID; a list of prospectuses, supplements and certificates of approval that have been approved under the Prospectus Directive; a list of administrative measures and sanctions imposed upon investment firms under Article 51 of MiFID; a list of sanctions imposed on MiFID investment firms under Article 14 of MAD and a list of management companies authorised under Article 6 of UCITS. (25/02/14) http://registers.esma.europa.eu/publication/start

ESMA: Speech by Verena Ross: Liquidity and new financial market regulation (25 February 2014)

Text of this speech, given to AFME, follows. Topics include: MiFID II, defining liquidity within financial markets for MiFID II and on the implementation of EMIR. (25/02/14) http://www.esma.europa.eu/system/files/2014-224_keynote_speech_afme_european_market_liquidity_conference_by_verena_ross_esma_executive_director.pdf

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ESMA: Appointments

ESMA has announced the appointments of the chairman and vice-chairmen of its Securities and Markets Stakeholder Group (SMSG). The new chairman, Dr. Jesper Lau Hansen, is currently Professor of Company Law and Financial Markets Law at Copenhagen University and represents the academic constituency. The two vice-chairmen, Judith Hardt, DG of FESE, and Peter De Proft, DG of EFAMA, represent financial market participants. (25/02/14) http://www.esma.europa.eu/news/Press-statement-ESMA-Stakeholder-Group-elects-Chair-and-Vice-Chairs?t=326&o=home

ESMA: Guidelines on certain aspects of the MiFID compliance function/suitability requirements

ESMA has published tables which set out the competent authorities which comply or intend to comply with ESMA’s guidelines on certain aspects of the MiFID compliance function and suitability requirements. (21/02/14) http://www.esma.europa.eu/system/files/2013-923_compliance_table_-_compliance_guidelines.pdf http://www.esma.europa.eu/system/files/2013-922_compliance_table_-_suitability_guidelines.pdf

EC: MiFID/MiFIR

Further to yesterday’s update, this press release notes that the Permanent Representatives Committee today approved, on behalf of the European Council, a compromise agreed with the European Parliament on the above. The Regulation and the Directive will now have to be approved by the European Parliament, so as to allow final adoption by the Council once the texts have been finalised in all languages. (19/02/14) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/141071.pdf

EC: MiFID/MiFIR

The EC has published new marked-up texts of the proposed Directives and Regulation along with a covering note. http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&f=ST%206406%202014%20INIT (18/02/14) http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&f=ST%206406%202014%20ADD%201 http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&f=ST%206406%202014%20ADD%202

ESMA: Classification of financial instruments as derivatives

ESMA has published the text of this letter from Steven Maijoor to Michel Barnier intended to draw his attention to concerns over issues arising from the definition of “derivative” or “derivative contract” in EMIR. He notes that the different transpositions of MiFID across Member States mean that there is no single, commonly adopted definition of either term in the EU, particularly with regard to foreign exchange forwards and physically settled commodity forwards. He argues that differences in the definitions will result in the inconsistent application of EMIR, (18/02/14) http://www.esma.europa.eu/system/files/2014-184_letter_to_commissioner_barnier_-_classification_of_financal_instruments.pdfa

EC Statement of EC and CFTC on progress relating to the implementation of the 2013 path forward statement

This press release notes that significant progress towards harmonizing a regulatory framework for CFTC-regulated swap execution facilities (SEFs) and EU-regulated multilateral trading facilities (MTFs) has been made. The “path forward” statement set out that the CFTC and EC would work together on extending appropriate, time-limited transitional relief to certain MTFs, in the event that the CFTC’s trade execution requirement was triggered before 15 March 2014; provided these platforms were subject to, amongst other matters, sufficient pre- and post-trade price transparency requirements, comparable provisions providing for non-discriminatory access by market participants, and appropriate governmental oversight. CFTC staff have now issued two “no-action” letters providing relief to certain EU-regulated MTFs. It is also noted that CFTC’s Division of Market Oversight also is currently developing a rulemaking to set out a process under s5h(g) of the Commodity Exchange Act for foreign-based swap trading platforms to seek appropriate regulatory treatment under US law. (14/02/14) http://europa.eu/rapid/press-release_STATEMENT-14-5_en.htm?locale=en

FCA: Market Watch Issue 45

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In this edition, FCA covers the following topics: best execution and SARs. FCA notes that it is currently conducting a review into best execution practices and reminds firms of their existing duties in the light of FCA rules and ESMA guidance. (11/02/14) http://www.fca.org.uk/static/documents/newsletters/market-watch-45.pdf

ESMA: MiFID practices for firms selling complex products

ESMA has published an Opinion with regard to the above, noting its particular concerns over the suitability and appropriateness of complex products that are increasingly being made available to retail investors. Specific areas covered are: firms’ organisation and internal controls; the assessment of the suitability or appropriateness of certain products; disclosures and communications in relation to products; and compliance monitoring of sales functions. (7/02/14) http://www.esma.europa.eu/system/files/2014-152_complex_financial_products.pdf http://www.esma.europa.eu/system/files/ipisc_complex_products_-_opinion_20140105.pdf

ESMA: Protocol - operation of the ESMA MiFID Database

This Protocol concerns the practical cooperation arrangements between the national competent authorities and ESMA in order to manage the calculation and publication of MiFID market transparency calculations. (30/01/14) http://www.esma.europa.eu/system/files/2013_68b_protocol_on_the_operation_of_esma_mifid_database_final.pdf

FCA: Short selling

FCA has noted a temporary restriction of short selling in Banco Popolare ISIN: IT0004231566. This is effective immediately until close of business 28 January 2014. (27/01/14) http://www.fca.org.uk/news/firms/temporary-restriction-in-short-selling

ESMA: Technical advice to the Commission on procedural rules to impose fines and periodic penalty payments to trade repositories

Further to an October 2013 consultation, ESMA has published a summary of the responses received by ESMA regarding the procedural rules to impose fines and periodic penalty payments to trade repositories and includes ESMA’s final technical advice to the EC on the future Regulation on the procedural rules to impose fines and periodic penalty payments to repositories which will be adopted by the EC in the form of a delegated act. ESMA notes that all its major proposals were supported by respondents, (24/01/14) http://www.esma.europa.eu/system/files/2013-1965_-_technical_advice_on_procedural_rules_to_impose_fines_on_trs.pdf

ECJ: Judgment in Case C-270/12: United Kingdom v Parliament and Council

The ECJ issued a press release on the judgement above, which concerned the Article 28 ‘emergency powers’ to ban short selling available to ESMA under the 2012 Short Selling Regulation. The UK claimed that this were ultra vires, and commenced an action to have Article 28 annulled. The ECJ unexpectedly dismissed the UK’s action on every ground, holding that Article 28 does not exceed the powers granted to ESMA when that body was created, and is, furthermore, perfectly compatible with the FEU Treaty. An alternative argument that Article 114 TFEU was not the correct legal basis for adopting Article 28 was also rejected. According to the ESMA website, both it and the European Commission welcome the ECJ’s ruling. (22/01/14) http://curia.europa.eu/jcms/upload/docs/application/pdf/2014-01/cp140007en.pdf

Council of the EU: Bank Recovery and Resolution Directive, Deposit Guarantee Scheme Directive and the directive on criminal sanctions for insider dealing and market manipulation

The Council of the EU published a note of its meeting with ECON. This recorded, among other things, that ECON had agreed to vote in favour of each of the above mentioned directives in, respectively, the second February, April, and first February plenary sessions 2014. (16/01/14) http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&gc=true&sc=false&f=ST%205309%202014%20INIT&r=http%3A%2F%2Fregister.consilium.europa.eu%2Fpd%2Fen%2F14%2Fst05%2Fst05309.en14.pdf

EC/European /Parliament: Trialogue agreement on MiFID II and MiFIR

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The Parliament and Commission announced that trialogue agreement has been achieved on the recast Markets in Financial Instruments Directive and Regulation, subject to some “fine-tuning” of the technical details. Commissioner Barnier gave some hints of the content of the deal: the Commission "would [...] have preferred a more ambitious implementation period" and its "proposed ambitious transparency regime for non-equity instruments, such as bonds and derivatives, has not been fully achieved". (15/01/14) http://europa.eu/rapid/press-release_MEMO-14-15_en.htm?locale=en http://www.europarl.europa.eu/news/en/news-room/content/20140110IPR32414/html/Deal-to-regulate-financial-markets-and-products-and-curb-high-frequency-trading

EC: Criminal sanctions for market abuse

This press release reports that ECON has) unanimously backed an agreement on the proposal reached with Member States, represented in the Council of Ministers. Under the new rules for countering insider dealing and market abuse, Member States will have to make sure that such behaviour, including the manipulation of benchmarks, is a criminal offence, punishable with effective sanctions everywhere in Europe. The agreement is now expected to be confirmed by the European Parliament in plenary in February 2014. (9/1/14) http://europa.eu/rapid/press-release_MEMO-14-6_en.htm?locale=en

The Stamp Duty and Stamp Duty Reserve Tax (European Central Counterparty N.V.) Regulations 2014/9

These Regulations revoke the Stamp Duty and Stamp Duty Reserve Tax (European Multilateral Clearing Facility N.V.) Regulations 2011/668) (the “EMCF Regulations”) and replace the EMCF Regulations with these Regulations. Regulation 1 provides for citation and commencement and effect, and regulation 2 contains definitions. Regulation 3 prescribes ECCN as a recognised clearing house for the purposes of the relief. Regulation 4 prescribes the circumstances in which the stamp duty and SDRT will not be charged. Regulation 5 revokes the EMCF Regulations. The purpose of the revocation and these Regulations is to reflect the change of name of European Multilateral Clearing Facility N.V. (“EMCF”) to ECCN. The change of name from EMCF to ECCN is effective from 6th January 2014 (Date in force: 30/01/14) (9/01/14) http://www.legislation.gov.uk/uksi/2014/9/contents/made

FCA: EMIR – trade reporting

FCA has published the slides from a presentation by John Tanner from its OTC Derivatives & Post Trade Policy unit. Topics include: EMIR reporting requirements; content of report; implementation timetable and outstanding issues. (8/01/114) http://www.fca.org.uk/static/documents/emir-trade-reporting-january-2014.pdf

ESMA: Draft technical standards under Article 10a(8) of MiFID on the assessment of acquisitions and increases in qualifying holdings in investment firms

Following a July 2013 consultation, ESMA’s final report provides a feedback statement on the draft standard (which notes instances where ESMA has changed the text following such feedback) and the full text of the draft regulatory and implementing technical standards. It is noted that the final report was to have been submitted to the EC by 1 January 2014, which has three months to decide whether to endorse ESMA’s draft technical standards. (7/01/14) http://www.esma.europa.eu/system/files/2013-1940_final_report_and_assessment_rts_its_0.pdf

European Parliament: Market abusers should face jail

More on the agreement reached with regard to the Market Abuse Directive, as noted in yesterday’s update. It notes that MEPs want to oblige all member states to set a maximum penalty of no less than four years in jail for the most serious forms of insider dealing or market manipulation and two years for improper disclosure of information, throughout the EU. (24/12/13) http://www.europarl.europa.eu/pdfs/news/expert/infopress/20131218IPR31337/20131218IPR31337_en.pdf

FSB: Policy framework for addressing shadow banking risks in securities lending and repos

Further to its August 201 consultation which set out proposals on minimum standards for methodologies to calculate haircuts on non-centrally cleared securities financing transactions and a framework of numerical haircut floors, FSB has now published responses, available to download individually via the following link. (23/12/13) http://www.financialstabilityboard.org/publications/c_131220.htm

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EC: Council confirms agreement with EP on market abuse directive

COREPER, on behalf of the European Council, has approved a compromise reached with the European Parliament on a draft directive on criminal sanctions for market abuse. (23/13/12) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/140276.pdf

ESMA: Waivers from pre-trade transparency

This document is aimed at competent authorities under MiFID to ensure that in their supervisory activities their actions are converging in accordance with the opinions provided by ESMA. It has been updated with new items denoted in red text. (20/12/13) http://www.esma.europa.eu/system/files/2011-241g__compilation_of_esma_opinions_and_cesr_positions_on_pre-trade_waivers_18122013.pdf

EC Report on the evaluation of the Regulation (EU) No 236/2012 on short selling and certain aspects of credit default swaps

The EC published this report evaluating the impact of last year’s Short Selling Regulation. Although the EC considers it too early to make suggestions for amending the legislation, it found that the Regulation has had a positive impact on transparency and settlement failures, and a “relatively mixed” economic impact. (16/12/13) http://ec.europa.eu/transparency/regdoc/rep/1/2013/EN/1-2013-885-EN-F1-1.Pdf

IOSCO: Regulatory issues raised by changes in market structure

The report looks at the trading of equities and exchange-traded funds on the most common trading spaces identified in a survey of different jurisdictions, including exchange trading market systems, non-exchange trading market systems and OTC trading, but not trading of derivatives products. The report identifies possible outstanding issues and risks posed by existing or developing market structures and it describes how these risks should be addressed. It recommends that regulators monitor the impact of fragmentation on market integrity and efficiency; availability and timeliness of information; order handling rules and best execution as well as access to liquidity.(13/12/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD431.pdf

IOSCO: Trading fee models and their impact on trading behaviour

This final report provides an overview of trading fees and trading fee models around the globe and how they influence trading behaviour. IOSCO notes that the data collected did not provide enough clear evidence to enable it to draw definitive conclusions about the impact or effect of trading fees or trading fee models on trading behaviours, but stated that the process was useful for gaining insight into the structure of fee models in use globally, the extent to which regulators are involved and standards used by regulators when oversight is performed. IOSCO will continue to monitor trading fee models and trading fees. If issues arise that warrant further investigation, IOSCO will consider further work on the matter. (13/13/12) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD430.pdf

ESMA: Securities Markets Stakeholder Group

ESMA has announced the composition of its new SMSG, which will replace the current group whose mandate expires on 31 December 2013. The 30 individuals drawn from 17 Member States will begin a term of 2½ years on 1 January 2014. UK members include Lindsey Rogerson (formerly of FSCP) and Elizabeth Corley (CEO, Allianz Global Investors)/ (12/12/13) http://www.esma.europa.eu/system/files/2013-1909_esma_appoints_new_securities_markets_stakeholders_group_members.pdf

ESRB: Central counterparties and systemic risk

This commentary risk provides a non-technical overview of the role of CCPs in the financial system and the importance of their resilience for broader financial stability. It focuses on potential systemic risks and highlights relevant considerations for policy. (2/12/13) http://www.esrb.europa.eu/pub/pdf/commentaries/ESRB_commentary_1311.pdf?0010e30f5c7462bb38a6839f5badfb8e

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ESMA: Trade repositories

ESMA notes that it has registered ICE TVEL and CME TR as trade repositories. (29/11/13) http://www.esma.europa.eu/news/ESMA-registers-ICE-TVEL-and-CME-TR-trade-repositories-1?t=326&o=home

IOSCO: Securities markets portal

IOSCO has announced the launch of a statistics web portal which seeks to provide a centralised point for monitoring global trends, risks and vulnerabilities; provides a mechanism for comparison of how well markets are recovering in light of the crisis; and provides IOSCO members and the broader financial community with easy access to key statistics, charts and indicators on a number of securities markets. The portal will be updated on a monthly basis and it is noted that further refinements are planned. A link to the portal appears in this press release. (28/11/13) http://www.iosco.org/news/pdf/IOSCONEWS308.pdf

FCA: Statement about broker-operated systems trading physically settled gas and power forwards

In September 2013, FSA had noted that brokers offering trading services in physically settled gas and power forwards were reviewing the appropriate classification of their systems under MiFID, particularly with regard to the interpretation of the MTF category under MiFID. FCA had expected brokers to make the changes necessary to differentiate clearly between their MTF and non-MTF services, on an appropriate basis, by 16 December 2013. Today’s statement notes that FSA is “continuing to discuss with brokers and their clients their proposals to achieve this further clarity” and confirms that ”progress towards implementing appropriate proposals has been made”, but has changed the implementation date to “no later than” 12 February 2014. FCA adds that it will not expect market participants using broker-operated systems to characterise trading in gas and power forwards that takes place before 12 February 2014 differently to their existing interpretations. (27/11/13) http://www.fca.org.uk/news/statement-about-broker-operated-systems-trading-physically-settled-gas-and-power-forwards

ESMA: Guidelines on ETFs and other UCITS issues

ESMA has updated this Q&A intended to promote common supervisory approaches and practices in the application of the UCITS Directive and its implementing measures, with a specific focus on the guidelines on ETFs and other UCITS issues. New items are highlighted in the document. (27/11/13) http://www.esma.europa.eu/system/files/2013-1547_qa_on_guidelines_on_etfs_and_other_ucits_issues.pdf

FCA: Speech by Martin Wheatley: Modelling integrity through culture (19 November 2013)

Text of the above, given at FCA’s Markets Conference, follows. He discusses past and present international regulatory regimes and concludes: “markets regulation is at the heart of the FCA, and we are at the heart of international regulation”. (19.11.13) http://www.fca.org.uk/news/firms/modelling-integrity-through-culture

FCA: Speech by David Lawton: Evolving the FCA's approach to markets regulation (19 November 2013)

Text of the above, given at FCA’s Markets Conference, follows. He discusses FCA’s market integrity, consumer protection and competition objectives, noting work on client assets and the forthcoming wholesale strategy review. (19/11/13) http://www.fca.org.uk/news/evolving-the-fca-approach-to-markets-regulation

FCA: CP13/16*: Competition in the markets for services provided by a Recognised Investment Exchange: proposed amendments to REC

In this CP, FCA discusses its interest in the activities of RIEs from a competition perspective, based on its view of how those activities can affect competition between an RIE and other trading infrastructures, between users of RIE facilities, and among service providers in the broader markets for exchange services; describes how FCA functions and powers can be used to pursue those interests, and sets out a number of proposed amendments to REC, where FCA considers that further clarity on its competition approach is needed, or where it believes that changes to the way it exercises its functions will enhance its ability to advance the competition objective. Responses are required by 31 January 2014. (18/11/13) http://www.fca.org.uk/static/documents/consultation-papers/cp13-16.pdf

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ESMA: Draft technical standards under EMIR on contracts with a direct, substantial and foreseeable effect within the Union and non-evasion- final report

ESMA has issued final draft regulatory technical standards related to derivative transactions by non-EU counterparties. EMIR provisions regarding central clearing and risk mitigation techniques also apply to those OTC derivatives entered into by two non-EU counterparties which have a direct, substantial and foreseeable impact on EU financial markets. The draft standards clarify that OTC derivative contracts entered into by two counterparties established in one or more non-EU countries, for which a decision on equivalence of the jurisdiction’s regulatory regime has not been adopted, will be subject to EMIR where one of the following conditions are met: one of the two non-EU counterparties to the OTC derivative contract is guaranteed by an EU financial for a total gross notional amount of at least €8bn, and for an amount of at least 5% of the OTC derivatives exposures of the EU financial guarantor; or the two non-EU counterparties execute their transactions via their EU branches and would qualify as financial counterparty if established in the EU. The draft standards will cover OTC derivative contracts concluded after the date the RTS becomes applicable. (18/11/13) http://www.esma.europa.eu/system/files/2013-1657_final_report_on_emir_application_to_third_country_entities_and_non-evasion.pdf

ESMA: Exchange traded derivatives

ESMA has published the text of a letter it has sent to the EC with regard to the latter’s intention to reject ESMA’s concerns over the start of reporting for exchange traded derivatives. It argues that: “we consider that allowing the reporting to start before appropriate and comprehensive guidance has been provided and before all reporting counterparties, trade repositories and competent authorities (as users of the data) have had sufficient time to incorporate that guidance in their systems, will diminish the quality of the data and could cause imprecise or faulty reporting, which is a cause of concern for all regulators”. It raises concerns that an EC statement there is no need to reconcile reporting under EMIR and MiFID and concludes: “we take note of the upcoming rejection of the proposed implementing technical standard. Although we consider that any guidance to be issued before February 2014, developed in a limited time and without consultation, is unlikely to produce the desirable quality of data that regulators would need for the exercise of their duties, І would like to inform you that ESMA is already working on providing some guidance, probably in the form of a Q&A, in case the Commission's intention is confirmed”. (18/11/13) http://www.esma.europa.eu/system/files/2013-1655_letter_jfaull_-_ec_intention_to_decline_etd_postponement.pdf

ESMA: Risk dashboard No 4

ESMA has published this document, which provides a snapshot of risk issues in Q3 2013 and covers the following areas: economic environment and securities markets conditions; liquidity risk; market risk; contagion risk; and credit risk. (18/11/13) http://www.esma.europa.eu/system/files/2013-1454_esma_risk_dashboard_no.4_2013.pdf

ESMA: ESMA’s policy orientations on possible implementing measures under the Market Abuse Regulation

This discussion paper sets out ESMA’s initial views on the implementing measures it will have to develop for MAR. It covers 10 sections of MAR where ESMA is expected to have to provide input, including conditions to be met by buyback programmes and stabilization measures to benefit from the exemption from market abuse prohibitions; arrangement and procedures required for market soundings, from the perspective of both the sounding and the sounded market participants; indicators and signals of market manipulation; criteria to establish accepted market practices; arrangement, systems and procedures to put in place for the purpose of suspicious transactions and order reporting as well as its content and format; issues relating to public disclosure of inside information and the conditions for delay; format for insider lists; issues concerning the reporting and public disclosure of managers’ transactions; arrangements for fair presentation and disclosure of conflicts of interests by producers and disseminators of investment recommendations and reporting of violations and related procedures. The paper is based on the version of the MAR Level 1 text agreed by the European Parliament, the Council and the European Commission in June 2013. Responses are required by 27 January 2014. ESMA will consider the feedback it receives in Q1 2014 and incorporate it in to its full consultation papers on both its draft technical standards and technical advice to the EC. The dates for these consultations are will depend on the publication of the final version of MAR. (14/11/13) http://www.esma.europa.eu/system/files/2013-1649_discussion_paper_on_market_abuse_regulation_0.pdf (NB: over 100 pages long)

OFGEM: REMIT penalties statement and procedural guidelines

OFGEM has published a feedback statement (in letter format) to its June 2013 consultation and issued a statements policy with regard to penalties and procedural guidelines on the Gas and Electricity Markets Authority’s use of its investigatory and enforcement powers under REMIT. The feedback statement notes comments made by respondents with regard to alignment with existing FCA guidance and it is noted that the Gas and Electricity Markets Authority has decided not to adopt certain aspects of FCA’s approach to calculating penalties in the REMIT guidelines before it has had the chance to consider them as part of the Enforcement Review. However, it is noted that there will be a review in

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the approach to calculating financial penalties in contested and settled cases and, as part of this, FCA’s approach (and those of other regulators) will be considered. A revised penalties statement will be submitted for consultation in 2014. (12/11/13) https://www.ofgem.gov.uk/ofgem-publications/84345/remitdecisionletter8november2013.pdf https://www.ofgem.gov.uk/ofgem-publications/84346/remitpenaltiesstatement8november2013.pdf https://www.ofgem.gov.uk/ofgem-publications/84347/remitproceduralguidelines8november.pdf

ESMA: Implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)

This updated Q&A provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of EMIR. New items are marked in red. (12/11/13) http://www.esma.europa.eu/system/files/2013-1633_qa_iv_on_emir_implementation.pdf (NB: over 50 pages long)

FSB: QIS on proposed regulatory framework for haircuts on securities financing transactions

FSB has launched the second-stage of its two-stage QIS on the proposed regulatory framework for securities financing transactions and is described as a more comprehensive quantitative assessment of the impact on a broader set of firms of FSB’s detailed haircuts proposals, both the proposed minimum standards for methodologies used by firms in calculating their own haircuts and the numerical haircut floors to be applied to certain securities financing transactions. Firms are asked to fill in the templates and respond to the questionnaire on a voluntary basis by 23 December 2013. FSB intends to finalise its recommendations by Q2 2014. (11/11/13) http://www.financialstabilityboard.org/press/pr_131105a.pdf

BoE: Financial Stability Paper No 25: The structure and dynamics of the UK CDS market

This paper analyses the structure and dynamics in the UK single-name credit default swap market and suggests that it demonstrates the usefulness of trade repository data to regulators, so that they estimate derivatives exposures arising between the various counterparties. (8/11/13) http://www.bankofengland.co.uk/publications/Documents/fsr/fs_paper25.pdf

EC: Communication on exchange traded derivatives

The EC has announced that it intends not to endorse ESMA’s draft implementing technical standards of 7 August 2013 amending Implementing Regulation (EU) No 1247/2012. ESMA had proposed to delay the reporting start date for exchange traded derivatives until 1 January 2015 in order for it to develop guidelines and recommendations to ensure a common, uniform and consistent application of Article 9 of EMIR. The EC states that the concerns do not justify the proposed delay in the implementation of the reporting of exchange traded derivatives to trade repositories under EMIR and suggests that the involvement of a chain of contracts in exchange traded derivatives does not prevent the identification of the counterparties or an adequate implementation of the reporting obligation and that postponing the start date “runs counter to the principle of ensuring the stability of the financial system and the functioning of the internal market for financial services”. (7/11/13) http://ec.europa.eu/internal_market/financial-markets/derivatives/index_en.htm#maincontentSec4

FCA: Statement on wholesale gas market manipulation

It is noted that FCA and OFGEM concluded the review of the allegations of manipulation of the gas market on 28 September 2012 and each found no evidence of market manipulation. (7/11/13) http://www.fca.org.uk/news/statements/statement-gas-market-manipulatio n

EBA/EIOPA/ESMA: Consultation paper on draft guidelines for complaints-handling for the securities (ESMA) and banking (EBA) sectors

This consultation concerns guidelines for complaints handling in the securities and banking sectors which will build on the existing guidelines on complaints handling by insurance undertakings published EIOPA in June 2012.. The objective is to provide EU consumers with a single set of complaints handling arrangements, irrespective of the type of product or service and of the geographical location of the firm in question. This will also allow firms to streamline and standardise their complaints handling arrangements and national regulators to supervise the same requirements across all sectors of financial services. Responses are required by 7 February 2014 and final guidelines are expected to be produced in Q1

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2014. (6/11/13) (6/11/13) http://www.eba.europa.eu/documents/10180/475982/JC-CP-2013-03+Joint+Committee+CP+complaints-handling+guidelines.pdf

ESMA: Speech by Steven Majoor: Issues and priorities (5 November 2013)

ESMA has published the text of the above, given at EFAMA’s investment management forum. Topics include: supervisiory convergence; ESMA’s work AIFMD, UCITs and ETFs; and other initiatives on which ESMA will contribute (including work a regulation on venture capital). (5/11/13) http://www.esma.europa.eu/system/files/2013-1582_esma_priorities_and_issues_efama_steven_maijoor_esma_chair_5_november_2013.pdf

ESMA: 14th extract from the EECS’ Database of Enforcement

ESMA has published extracts from its confidential database of enforcement decisions on financial statements, with the aim of providing issuers and users of financial statements with relevant information on the appropriate application of IFRS.. (30/10/13) http://www.esma.europa.eu/system/files/2013-1545_14th_extract_from_the_eecs_database_of_enforcement.pdf

FMLC: MiFID II and MAR – points concerning algorithmic and high frequency trading

FMLC has published a letter to the EC on the above-mentioned topic raising issues with regard to legal uncertainty in MiFID II and MAR. Specific topics raised include: various definitions, including the meaning of “market manipulation” and the role of market participants in considering whether transactions or orders to trade represent market manipulation, (24/10/13) http://www.fmlc.org/Documents/FMLC%20letter%20and%20appendix.pdf

ESMA: Technical advice to the Commission on procedural rules to impose fines on trade repositories

ESMA has published this consultation in respect of the above which sets out ESMA’s preferred options for the procedural rules on imposition of fines and periodic penalty payments to trade repositories. The proposals cover the procedures to guarantee the rights of defence both during and upon completion of investigations, the reasonable time limit for written submissions and/or convocation of any oral hearing; the procedures regarding access to files by the persons subject to investigations, preservation of legitimate interests of other persons in the protection of their business secrets and protection of confidential information affecting third parties; the documents to be submitted by the independent investigation officer to ESMA’s board of supervisors; the limitation periods for imposition or enforcement of penalties; and the methods for the collection of fines or periodic penalty payments. Responses are required by 15 November 2013and ESMA aims to deliver its advice by 31 December 2013. (18/10/13) http://www.esma.europa.eu/system/files/2013-1292_cp_on_technical_advice_to_the_commission_re_trade_repositories_fining_procedures.pdf

ESMA: Speech by Stephen Majoor: International coordination of the regulation and supervision of OTC derivatives markets (17 October 2013)

Text of the above, given at the American Bar Association, follows. Topics include: the international coordination of OTC derivatives regulation and supervision and an overview of ESMA’s international activities and expansion of its supervisory role. (17/10/13) http://www.esma.europa.eu/system/files/2013-1486_international_coordination_of_the_regulation_and_supervision_of_otc_markets_-_steven_maijoor_esma_chair_at_aba_london_17_otober_2013_final.pdf

EC: Speech by Joaquin Almunia: Competition among financial markets operators (17 October 2013)

Text of the above, given at the ECMI Annual Conference, follows. Topics include: regulatory overview; state aid for banks; banking union; current anti-trust investigations (LIBOR/EURIBOR, credit default swaps, Platts and proposed mergers of exchanges). (17/10/13) http://europa.eu/rapid/press-release_SPEECH-13-834_en.htm?locale=en

IOSCO: Securities markets risk outlook for 2013-2014

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The report highlights important trends, vulnerabilities and risks in securities markets, The four main risks it identifies and analyzes in depth relate to the following: risks related to low interest rate environment; risks related to collateral management; risks related to derivatives markets and risks related to capital flows of emerging markets: (16/10/2013) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD426.pdf (NB: over 80 pages long)

ESMA: Speech by Steven Majoor: Keynote address (2 October 2013)

Text of the above, given at the BWF/ICMA Capital Markets conference, follows in which he discusses “the past, the present and future of EMIR and ESMA”. He notes plans for “changes aimed at strengthening our peer review tool with more on-site visits, targeting of topical supervisory matters and more independent assessment teams. Indeed, this means that a group composed of representatives of national competent authorities and ESMA staff will be visiting a selection of national regulators to interview employees but also to review supervisory files”. (4/10/13) http://www.esma.europa.eu/system/files/2013-1394_key_note_address_bwf-icma_capital_markets_conference_-_frankfurt.pdf

ESMA: Meeting of the Principals of the OTC Derivative Regulators Group

ESMA has published a short note of its meeting on 20 September 2013. It will meet again in February 2014 to discuss the points raised. (3/10/13) http://www.esma.europa.eu/system/files/2013-1400.pdf

IOSCO: Thematic review on the implementation of Principles 6 and 7 of the IOSCO objectives and principles of securities regulation

IOSCO Principle 6 requires regulators to have or contribute to a process to monitor, mitigate and manage systemic risk, appropriate to their mandate and Principle 7 requires regulators to have or contribute to a process to review the perimeter of regulation regularly. The review on the implementation of these Principles found that participating jurisdictions had made significant efforts to implement them and good progress in developing processes and procedures to identify systemic risks. However, there was a need for further work to develop processes to manage and mitigate systemic risks and it was noted that many jurisdictions had only developed informal, rather than formal processes. The report makes a number of recommendations help IOSCO members in developing and embedding systemic risk and regulatory perimeter review processes (30/09/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD424.pd f (NB: over 40 pages long)

ECB: Framework for the assessment of securities settlement systems and links to determine their eligibility for use in Eurosystem credit operations

The framework document sets out a new approach which replaces the framework that has been in place since 1998, intended to introduce “considerable procedural simplifications”. (30/09/13) http://www.ecb.europa.eu/pub/pdf/other/frameworkfortheassessmentofsecuritiessettlementsystems201309en.pdf?8de9e4f845e45c06e1949b6286c6aba4

ESMA: Trends, risks vulnerabilities (No. 2)

ESMA has published this report which looks at the performance of securities markets in the first half of 2013 and a “risk dashboard” for Q2 2013. The report finds that EU securities markets and investment conditions in the EU have improved for a second quarter in a row since the Q4 2012, although systemic risk persisted at medium to high levels. The report includes in-depth analyses on the following topics: first evidence on the impact of the Short-Selling Regulation on securities markets; contagion risks and the network structure of EU CDS exposures; an overview of the EU UCITS industry; and an overview of bail-in and contingent capital securities. (20/09/13) http://www.esma.europa.eu/system/files/2013-1324_press_release_trend_risk_vulnerabilities_no._2__2013.pdf (press release) http://www.esma.europa.eu/system/files/2013-1138_trends_risks_vulnerabilities_no._2_2013_0.pdf (report - NB: over 90 pages long) http://www.esrb.europa.eu/pub/pdf/dashboard/130919_ESRB_risk_dashboard.pdf?02ab39f7559bc797958562db20dbae93 (dashboard – NB: over 30 pages long)

FCA: Transfer of Turquoise Derivatives to London Stock Exchange plc

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FCA reports that, from 30 September 2013, trading in derivatives will be conducted on the London Stock Exchange Derivatives Market (“LSEDM”) and the Rules of the London Stock Exchange Derivatives Market will be effective from this date. (18/09/13) http://www.fca.org.uk/firms/systems-reporting/transaction-reporting

IOSCO: Cross-border cooperation

IOSCO has adopted a number of measures intended to encourage non-signatory members to sign the IOSCO Multilateral Memorandum of Understanding on cooperation and exchange of information. Among these, it has approved a resolution that calls for gradually restricting opportunities of non-signatory members to influence key IOSCO decisions due to the limited support they can provide to IOSCO´s enforcement efforts, suggesting that as long as jurisdictions remain outside the international enforcement regime of the MMoU, they offer potential safe havens for wrong doers and create gaps in IOSCO´s global enforcement network. (18/09/13) http://www.iosco.org/news/pdf/IOSCONEWS299.pdf

ESMA: EMIR implementation timetable

ESMA has published a revised timetable, noting that the key change relates to the registration of the first trade repositories - ESMA now expects to make those first registration decisions not before 7 November (it had originally envisaged a late September date). Consequently, counterparties’ reporting to trade repositories is not expected to start before February 2014. (13/09/13) http://www.esma.europa.eu/news/Trade-Repository-registration-approval-not-expected-7-November-reporting-begin-February-2014?t=326&o=home

FCA: Introduction to the EMIR technical standards

FCA has published the text of a slide presentation on EMIR given Barry King of FCA’s OTC derivatives and post trade policy division. It appears to be a revised version of a January 2013 presentation given by FSA. Topics include: reporting requirement; clearing obligations; risk mitigation for uncleared trades and UK implementation. (11/09/13) http://www.fca.org.uk/static/fca/documents/emir-implementation-presentation.ppt

European Parliament: Market Abuse Directive

Further to yesterday’s report, the MAD text as approved by the European Parliament appears in the link below with other adopted texts. (11/09/13) http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+20130910+SIT+DOC+WORD+V0//EN&language=EN (NB: over 700 pages long)

EC/European Parliament: Market Abuse Regulation

The press release (first link below) announces that the European Parliament has voted to formally endorse the political agreement on the Market Abuse Regulation, subject to alignment with the final political agreement on MiFID II and revisions by legal linguists and revisers. It also includes an FAQ on the Regulation. The European Parliament’s press release (third link below) notes that it should start the negotiations with member states on the Market Abuse Directive (criminal sanctions for market abuse) in October The second link is a statement from Michel Barnier on the Regulation.. (10/09/13) http://europa.eu/rapid/press-release_MEMO-13-774_en.htm?locale=en http://europa.eu/rapid/press-release_MEMO-13-773_en.htm?locale=en http://www.europarl.europa.eu/news/en/news-room/content/20130906IPR18863/html/Tougher-sanctions-for-financial-markets-manipulation

ECB modifies loan-level reporting requirements for some asset-backed securities

This press release announces that ECB has decided to enhance the loan-level reporting requirements for residential mortgage-backed securities and asset backed securities backed by loans to small and medium-sized enterprises (SME ABSs) that are used as collateral in Eurosystem monetary policy operations and are unable to satisfy the timeline announced on 27 November 2012. As of 16 October 2013, those securities for which the mandatory level of compliance with reporting requirements has not been attained and for which the data provider has neither given an explanation for that non-compliance nor provided action plan for achieving full compliance, will become ineligible for use as Eurosystem collateral. As of 16 October 2013, the Eurosystem may temporarily accept non-compliant securities as eligible collateral, on a case-by-case basis. (9/09/13) http://www.ecb.europa.eu/press/pr/date/2013/html/pr130909.en.html

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AIMA: Regulating capital markets

This document sets AIMA’s policy position on key issues facing the global hedge fund sector in particular and financial markets in general, revised from 2009. These cover: investor protection, regulation and supervision; systemic risk and market integrity. (6/09/13) http://www.aima.org/download.cfm/docid/D5EB03A4-1B0F-4771-870C9236941287DB

EC: Shadow banking – addressing new sources of risk in the financial sector/Regulation of the European Parliament and of the Council on money market funds

The EC has adopted a Communication on shadow banking as a follow up to last year’s Green Paper and published a proposed framework designed for money market funds. The Communication sets out the issues at stake in relation to the shadow banking system and the measures already taken to deal with related risks and outlines priorities on which the EC intends to take initiatives in areas such as money market funds and risks related to shadow banking such as transparency, risks associated with securities financing transactions and risks relating to interconnectedness with the banking system. The Regulation sets out proposed rules which include the requirement of money market funds to have at least 10% of their portfolio in assets that mature within a day and another 20% that mature within a week and establish a pre-defined capital buffer to take account of the constant NAV. (4/09/13) http://europa.eu/rapid/press-release_IP-13-812_en.htm?locale=en (press release) http://ec.europa.eu/internal_market/finances/docs/shadow-banking/130904_communication_en.pdf (Communication on shadow banking – in draft) http://europa.eu/rapid/press-release_MEMO-13-763_en.htm (FAQ on shadow banking) http://ec.europa.eu/internal_market/investment/docs/money-market-funds/130904_mmfs-regulation_en.pdf (Regulation - NB: over 40 pages long) http://europa.eu/rapid/press-release_MEMO-13-764_en.htm (FAQ on money market funds)

BoE: The fractal market hypothesis and its implications for the stability of financial markets

This paper examines why and how fractal properties in time series of some financial market prices might arise, and considers their implications for understanding the causes of financial (in)stability. It considers the implications for securities regulation. (23/008/13) http://www.bankofengland.co.uk/publications/Documents/fsr/fs_paper23.pdf

BIS/IOSCO: Point of sale disclosure in the insurance, banking and securities sectors

This consultation identifies and assesses differences and gaps in regulatory approaches to point of sale disclosure for investment and savings products across the insurance, banking and securities sectors. The report considers whether regulatory approaches to disclosure need to be further aligned across sectors. It proposes a number of recommendations. It suggests that jurisdictions should consider implementing a concise written or electronic point of sale disclosure document for the product sample identified in this report, taking into account the jurisdiction’s regulatory regime and to be provided to consumers free of charge, before the time of purchase. (15/08/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD421.pdf (NB: over 30 pages long)

FCA: EMIR notifications and exemptions

This webpage sets out details of the main notifications and applications under EMIR. (13/08/13) http://www.fca.org.uk/firms/markets/international-markets/emir/emir-notifications-and-exemptions

EC: Commission Delegated Regulation (EU) No 759/2013 of 30 April 2013 amending Regulation (EC) No 809/2004 as regards the disclosure requirements for convertible and exchangeable debt securities

This has been published in the Official Journal. (8/08/13) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:213:0001:0009:EN:PDF

ESMA: Draft implementing technical standards amending Commission Implementing Regulation (EU) No 1247/2012 laying down implementing technical standards with regard to the format and frequency of trade reports to trade repositories under Regulation (EU) No 648/2012

ESMA has sent the EC this final report which proposes an amendment to Article 5 of the Commission Implementing Regulation (EU) No.1247/2012 (ITS on reporting) on the format and frequency of reporting to trade repositories under EMIR. The amendment relates to the reporting of exchange traded derivatives and proposes postponing the reporting start date by one year. It notes that Article 5 specifies the reporting start date of derivatives to trade repositories, but

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does not include a specification of exchange traded derivatives. The EC has three months to decide whether to endorse ESMA’s draft implementing technical standards. (8/08/13) http://www.esma.europa.eu/system/files/2013-1087_-_final_report_on_amending_its_on_etd_reporting.pdf

FCA: Market Watch 44

Topics include: an update on suspicious transaction reports; Turquoise derivatives transfer to LSE and recent enforcement cases. (5/08/13) http://www.fca.org.uk/static/documents/newsletters/market-watch-44.pdf

ESMA: Guidelines on enforcement of financial information

The guidelines aim to strengthen and promote greater supervisory convergence in existing enforcement practices amongst EU national authorities. The guidelines define enforcement and its scope; expected characteristics of the enforcer; acceptable selection techniques and other aspects of enforcement methodology; the types of enforcement actions that may be available to enforcers; and how enforcement activities are coordinated within ESMA. The guidelines also propose that the coordination of European enforcers by ESMA should involve the development of coordinated views on accounting matters prior to national enforcement actions, the identification of common enforcement priorities and common responses to the accounting standard setter to ensure consistent application of the financial reporting framework. Responses are required by 15 October 2013 and ESMA expects to publish the final guidelines in 2014. (19/07/13) http://www.esma.europa.eu/system/files/2013-1013_consultation_paper_-_guidelines_on_enforcement_of_financial_information.pdf (NB: over 30 pages long)

IOSCO: Cyber-crime, securities markets and systemic risk

IOSCO, together with the World Federation of Exchanges, has published this report which considers the evolving nature of cyber-crime in securities markets and the threat it poses to the fair and efficient functioning of markets. It highlights the urgent need to consider cyber threats to securities markets as a potential systemic risk The first part of the report assesses what is known of the cyber-threat so far and presents a framework for monitoring the extent of cyber-crime in securities markets going forward The second part of the report provides the results of a survey to the world exchanges. It is noted that the survey is intended as part of a series of surveys exploring the experiences of different groups of securities market actors. The survey revealed that a significant number of exchanges are already under attack with 53% suffering an attack in the last year. (16/07/13) http://www.iosco.org/research/pdf/swp/Cyber-Crime-Securities-Markets-and-Systemic-Risk.pdf (NB: over 50 pages long)

EC: Commission Delegated Regulation (EU) No …/.. of 12.7.2013 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to fees charged by the European Securities and Markets Authority to trade repositories/Commission Delegated Regulation (EU) No …/.. of 12.7.2013 amending Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to the list of exempted entities

The EC has published these delegated Regulations. (15/07/13) http://ec.europa.eu/internal_market/financial-markets/docs/derivatives/130712_delegated-regulation-fees-esma_en.pdf http://ec.europa.eu/internal_market/financial-markets/docs/derivatives/130712_delegated-regulation-emir-central-banks_en.pdf

ESMA: Draft regulatory technical standards on information requirements for assessment of acquisitions and increases in holdings in investment firms (MiFID)

The proposed standards set out in this consultation are based on the CEBS, CESR and CEIOPS ‘Guidelines for the prudential assessment of acquisitions and increases in holdings in the financial sector required by Directive 2007/44/EC’ and a February 2013 report issued by the EC to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of Regions on the application of Directive on acquisitions and increase of holdings in the financial sector. Responses are required by 9 September 2013. ESMA will consider the responses it receives in Q4, and will finalise the draft standards for sub-mission to the EC by 1 January 2014 for endorsement. (9/07/13) http://www.esma.europa.eu/system/files/2013-918_cp_draft_rts_information_reqs_assessment_acquisitions_20130708.pdf

EC: Proposal for a Regulation of the European Parliament and of the Council on insider dealing and market manipulation (market abuse) (MAR)

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The Council has published what is described as a consolidated version of the political agreement with the European Parliament on the above-mentioned regulation dated 5 July 2013. (8/07/13) http://register.consilium.europa.eu/pdf/en/13/st11/st11384-ad02.en13.pdf (NB: over 100 pages long)

ESMA: Protocol on the operation of notifications of MiFID Article 41 suspensions and removals of financial instruments from trading

This protocol has been created to ensure effective co-operation between competent authorities with respect to their obligations under Article 41 of MiFID. (8/07/13) http://www.esma.europa.eu/system/files/2013-894_protocol_on_notifications_of_mifid_art_41_suspensions_and_removals.pdf

FCA: Short selling

FCA has announced a temporary of short selling in the following instruments under Article 23(1) of Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps. a) BANCO COMERCIAL PORTUGUES S.A. PTBCP0AM0007; b) BANCO ESPIRITO SANTO, S.A. PTBES0AM0007; c) SONAE INDUSTRIA, SGPS, S.A. PTS3P0AM0017 This measure is effective from 08:00am 4 July 2013 until 11:59pm 4 July 2013. (4/07/13) http://www.fca.org.uk/news/list/temporary-prohibtion-in-short-selling

FCA: Speech by Martin Wheatley: Balance of interests (26 June 2013)

Text of the above, given at the International Derivatives Expo, follows. He discusses regulatory aspects of derivatives and LIBOR. He notes: “The rules on dispute resolution, portfolio reconciliation and compression will be switched on in September. The rules around reporting to trade repositories should follow a few months after that. The prudential obligations – mandatory clearing and collateralisation of bilateral trades – are on a longer timeline of 2014 and 2015. They are likely to be a significant compliance challenge – I understand that – but firms have time on their sides if they start preparing now. Regulators are unlikely to be sympathetic, two years down the line, to any arguments that there were too few months to get the ship in order. So, I do expect to see you on the front foot. I do expect you to be developing implementation plans. … And let me also ask you to please work with the FCA, and international regulators, on resolving unresolved issues like non- equity transparency, G20 trading obligations and cross-border rules”. (27/06/13) http://www.fca.org.uk/news/speeches/balance-of-interests

ESMA: Speech by Steven Majoor: Keynote speech (27 June 2013)

Text of the above, given at the FESE Convention 2013, follows. He discusses MiFID/MIFIR and MAR, particularly with regard to transparency, market surveillance; exchange trade derivatives reporting, investor protection and securities markets funding. He comments: “The EU has taken a big leap towards a single market by enshrining the bulk of the new rules in European regulations, directly applicable and identical in all Member States … many matters will need adjustment, fine-tuning, the adaption of rules to market circumstances and, even temporarily, suspending their effect when exceptional circumstances arise. This is what regulators do all the time at national level or in third countries, however we do not have those supervisory instruments at EU level. Certain matters can be adjusted at national level, some others can be harmonised through guidelines, but others, being set in Regulations, cannot be tackled via supervisory measures. The main instrument to modify the application of the Regulations, the technical standards, remains a rulemaking process, subject to full legislative oversight and requiring several months to come into force. MiFIR, EMIR and the Short Selling Regulation, will certainly test the effectiveness of the new rulemaking process, the one based on technical standards. …. ESMA is very happy with the new instruments in its toolbox, and we will fully respect the conditions and instructions that come with these new instruments, however, we need to be aware that where we use technical standards, many other regulators are using supervisory measures. Hence, the swiftness with which we will be able to adopt, review and even reverse those standards in the EU, depending on market changes, will determine the effectiveness of the new instruments in the tool box”. (27/06/13) http://www.esma.europa.eu/system/files/2013-826_keynote_speech_-_fese_convention_2013_steven_maijoor_berlin_27_june_2013.pdf

EC: Council confirms agreement with European Parliament on market abuse regulation

It has been announced that a compromise has been reached with the European Parliament on the draft market abuse regulation. The agreement will enable the Presidency to start negotiations with the European Parliament on the draft directive, with the aim of adopting both regulation and directive at first reading. Negotiations on the regulation were concluded at a "trilogue" meeting with the Parliament on 20 June 2013. (26/06/13)

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http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137623.pdf http://europa.eu/rapid/press-release_MEMO-13-595_en.htm?locale=en http://www.eu2013.ie/news/news-items/20130620marketsabuseregulationpr/

FOA/FIA: Agreement to combine organisations

FOA and FIA have announced an agreement in principle to combine their two organisations under one global structure and brand called FIA Global. Under this agreement, FIA—with its affiliate FIA Asia—will form a confederation with FOA under FIA Global. To reflect the affiliation with FIA and to enhance the development of a global brand, it is proposed that FOA will change its name to FIA Europe. (21/06/13) http://www.futuresindustry.org/files/fia-global/FOA%20and%20FIA%20Announce%20Affiliation%20Agreement%206-21-13.pdf

EC: Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)/ Proposal for a Regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories

“General approach” versions of the Directive and Regulation – described as subject to confirmation on 21 June 2013 - have been published together with a covering note. The covering note includes statement in which “the UK expresses concern that it is legally uncertain whether the powers granted to ESMA in Articles 31 and 35 are acceptable in terms of the principles derived from Case 9/56 Meroni v High Authority [1957-1958] ECR 133 concerning the nature of decisions which may be vested with Union Agencies”. (19/06/13) http://register.consilium.europa.eu/pdf/en/13/st11/st11006.en13.pdf (NB: over 200 pages long) http://register.consilium.europa.eu/pdf/en/13/st11/st11007.en13.pdf (NB: over 100 pages long)

ESMA: Exemption for market making activities and primary market operations under Regulation (EU) 236/2012 of the European Parliament and the Council on short selling and certain aspects of Credit Default Swaps

ESMA has published a compliance table in relation to its guidelines on exemption for market making activities and primary market operations under the Short Selling Regulation. The table indicates which national competent authorities have declared that they comply or intend to comply with the guidelines and which do not comply. ESMA has also published the explanations provided by those national competent authorities who have indicated their non-compliance. (19/06/13) http://www.esma.europa.eu/system/files/2013-765_guidelines_compliance_table_-_market_making_guidelines.pdf http://www.esma.europa.eu/system/files/2013-74.pdf

EC: Markets in financial instruments: Council sets out its position

The Permanent Representatives Committee has agreed, on behalf of the Council, its position on new rules on the provision of services for investments in financial instruments and on the operation of regulated financial markets. The Council is expected to confirm the agreement, without discussion, at its meeting on 21 June 2013. This will enable the presidency to negotiate with the European Parliament with the aim of adopting the texts at first reading. (17/06/13) http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/137497.pdf

EC: ESMA’s advice on the equivalence of third countries under EMIR

ESMA has published a letter sent to it by the EC which extends the deadlines for its advice on the equivalence of third countries under EMIR. The new deadlines for ESMA’s advice on the US and Japanese regimes are now due on 1 September 2013 and 1 October 2013 for other third countries. (14/06/13) http://www.esma.europa.eu/system/files/2013_14_june_2013_letter_esma.pdf

ESMA: Annual Report 2012

ESMA has published its annual report providing an overview of its work during the year. (14/06/13) http://www.esma.europa.eu/system/files/esma_annual_report_2012.pdf (NB: over 90 pages long)

EC: Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)/ Proposal for a Regulation of the

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European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories

Marked-up Presidency compromise texts dated 10 June 2013 follow. (13/06/13) http://register.consilium.europa.eu/pdf/en/13/st09/st09711-re02.en13.pdf (NB: over 200 pages long) http://register.consilium.europa.eu/pdf/en/13/st09/st09710-re02.en13.pd f (NB: over 100 pages long)

ESMA: Guidelines on remuneration policies and practices (MiFID)

ESMA has published the final guidelines, which includes details of feedback from ESMA’s September 2012 consultation and details of changes made since the consultation. National securities regulators are expected to comply with these guidelines and will have two months from date of publication of the translations of the guidelines to inform ESMA whether they intend to do so or give their reason otherwise. The guidelines will become applicable to market participants 60 days after the deadline for the “comply or explain” obligation of national securities regulators. (11/06/13) http://www.esma.europa.eu/system/files/2013-726_press_release_on_mifid_remuneration_guidelines.pdf http://www.esma.europa.eu/system/files/2013-606_final_report_guidelines_on_remuneration_policies_and_practices_mifid.pdf

BoE: Speech by Andrew Hauser: The future of repo: ‘too much’ or ‘too little’? (11 June 2013)

Text of the above, given at ICMA, follows, in which he suggests: “like banking, a well-functioning repo market is important, if not crucial, for our economic welfare. But, also just like banking, there can be ‘too little’ or ‘too much’ repo. ‘Too little’ provision of collateral and financing could leave economic growth below potential. But ‘too much’ could cause the system to overreach, straining asset valuations and ultimately leading to an unravelling. The very features that make repo so effective in reducing counterparty risk at a microprudential level – collateralization, marking to market, regular remargining, and short maturities – also pose potential new macroprudential risks”. (11/06/13) http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech665.pdf

ESMA: Guidelines and recommendations for establishing consistent, efficient and effective assessments of interoperability arrangements

The guidelines and recommendations define what national competent authorities should analyse in assessing an interoperability arrangement and therefore on what aspects of the interoperable arrangement the relevant CCPs will need to focus their attention. They do not introduce new requirements for CCPs in addition to the ones specified in EMIR or the relevant technical standards. However, they specify how those requirements should be met for the purpose of establishing robust and stable interoperability arrangements. They focus on risks that might arise from interoperability arrangements and outline the areas on which CCPs should focus, and which national competent authorities should verify, to mitigate those risks. The guidelines and recommendations apply from 10 June 2013. (11/06/13) http://www.esma.europa.eu/system/files/esma_guidelines__recommendations_on_interoperability_arrangements_-_as_approved_by_bos_20130314.pdf

FCA: Short Selling Regulation

FCA has published a factsheet for firms, including details of notifications required. (10/06/13) http://www.fca.org.uk/static/documents/factsheets/short-selling-factsheet.pdf

OFGEM: Consultation on REMIT/The Electricity and Gas (Market Integrity and Transparency) (Enforcement etc.) Regulations 2013/1389

OFGEM has published a consultation with regard to the proposed new approach to new enforcement powers relating to market abuse in wholesale energy markets. The Regulation, which comes into force on 29 June 2013, provides that enforcement of REMIT requirements is the responsibility of “national regulatory authorities”; for Great Britain that is the Gas and Electricity Markets Authority. The consultation sets out a number of questions for GEMA to consider. Responses to the consultation are required by 28 August 2013 and GEMA intends to finalise documentation with regard to its guidelines in October 2013. (10/06/13) http://www.ofgem.gov.uk/About%20us/enforcement/Documents1/REMIT%20consultation%20letter%20as%20at%206%20June%20final.pdf http://www.legislation.gov.uk/uksi/2013/1389/pdfs/uksi_20131389_en.pdf

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ESMA: Risk dashboard

ESMA reports that the overall level of systemic risk in EU securities markets decreased throughout Q4 2012, but suggests that market clustering and fragmentation, funding risk, the low interest rate environment and obstacles to orderly market functioning remained important sources of uncertainty for EU financial stability. ESMA’s outlook on liquidity, market and contagion risks remains unchanged. (10/06/13) http://www.esma.europa.eu/system/files/2013-712_esma_risk_dashboard_no_2_0.pdf

EC: Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)/ Proposal for a Regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories

Marked-up Presidency compromise texts dated 4 June 2013 follow. (6/06/13) http://register.consilium.europa.eu/pdf/en/13/st09/st09711-re01.en13.pdf (NB: over 200 pages long) http://register.consilium.europa.eu/pdf/en/13/st09/st09710-re01.en13.pdf (NB: over 100 pages long)

ESMA: Q&A: Implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)

This updated Q&A provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of EMIR. (6/06/13) http://www.esma.europa.eu/system/files/2013-685_qa_ii_on_emir_implementation_final_for_publication_20130604.pdf (NB: over 30 pages long)

ESMA: ESMA‘s technical advice on the evaluation of the Regulation (EU) 236/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps

The report makes a number of recommendations that would help to improve how the Regulation works in practice and analyses the market impact of the transparency requirements, restrictions on uncovered short selling and uncovered sovereign CDS and of any temporary measures restricting short selling; and considers whether the current provisions of the Regulation and their application are fulfilling the needs of market participants in terms of transparency and the needs of the regulators to perform their supervisory functions. Technical advice key recommendations set out in the document relate to transparency and reporting requirements; restrictions on uncovered short sales in shares and sovereign debt; the ban on uncovered sovereign CDS transactions; shares exempted from the Regulation on the basis of turnover calculations and emergency measures in case of a significant fall in price. (3/06/13) http://www.esma.europa.eu/system/files/2013-649_press_release--esma_publishes_review_on_impact_of_short_selling_regulation.pdf (press release) http://www.esma.europa.eu/system/files/2013-614_final_report_on_ssr_evaluation.pdf (report - NB: over 90 pages long)

FCA: Revised note on the UK notification process for market makers and authorised primary dealers

This sets out the process for making notifications to FCA as the UK competent authority for the EU’s Regulation on short selling and certain aspects of credit default swaps. It takes into account the Guidelines issued by ESMA on the exemption which enters into force on 2 June 2013 and supersedes FSA’s September 2012 document. (3/06/13) http://www.fca.org.uk/static/documents/uk-notification-process.pdf

FCA: Short selling – new regime for notifications and disclosures

This webpage sets out details on the new regime, largely in a Q&A format. From 10 June 2013 there will be a new registration form and requirements (for those who have not previously registered) one form to make all notifications and disclosures for shares (including correcting or deleting previous incorrect notifications) and one form to make all notifications and disclosures for sovereign debt or sovereign credit default swaps (including correcting or deleting previous incorrect notifications). Copies of the new forms and further details on the process will be available to download from 7 June 2013. (30/05/13) http://www.fca.org.uk/firms/markets/international-markets/eu/short-selling-regulations/notifications-disclosures

ESMA: Request for technical advice on possible delegated acts concerning the procedural rules for taking supervisory measures and imposing fines on trade repositories

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ESMA has published the text of this request it has received from the EC, which sets out the scope of the advice required in respect of EMIR and notes that the closing date for delivery of the advice is 31 December 2013. (28/05/13) http://www.esma.europa.eu/system/files/request_for_technical_advice.pdf

EC: Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)/ Proposal for a Regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories

Marked-up Presidency compromise texts dated 21 May 2013 has been published. (23/05/13) http://register.consilium.europa.eu/pdf/en/13/st09/st09711.en13.pdf (NB: over 200 pages long) http://register.consilium.europa.eu/pdf/en/13/st09/st09710.en13.pd (NB: over 100 pages long)

EC: Revised rules for markets in financial instruments (MiFID/MiFIR) - a) Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast) (MiFID) b) Proposal for a Regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories (MiFIR)

This is a “general approach” document (dated 15 April 2013). It notes that as at 13 April 2013, there was not yet a qualified majority supporting an overall compromise in particular because of the key outstanding issue of access to trading venues and central counterparties (CCP) (MiFIR, Articles 28-30. It goes on to suggest that the Permanent Representatives Committee of the Council agree on Articles 28-30 in MiFIR and invites the Working Party on Financial to finalise the text, and submit the general approach for agreement by COREPERr in the very near future. (9/05/13) http://register.consilium.europa.eu/pdf/en/13/st08/st08322.en13.pdf

ESMA: Threshold for sovereign issuers

ESMA has published an updated spreadsheet as at 1 May 2013. (2/05/13) http://www.esma.europa.eu/news/ESMA-publishes-quarterly-update-notification-thresholds-sovereign-issuers

ESMA: Emergency measure by the Greek HCMC under Section 1 of Chapter V of Regulation No 236/2012 on short selling and certain aspects of credit default swaps

ESMA has published its opinion on the emergency measure by the Greek Hellenic Capital Markets Commission under the Short Selling Regulation. The measure was expected to enter into force on 1 May 2013 at 0:00:01 hours (Athens time) and to be applicable until 24:00:00 (Athens time) on 31 July 2013. ESMA considers that there are adverse developments relating to the banking sector which constitute a serious threat to financial stability and to market confidence in Greece; that the measure which is targeted at credit institutions admitted to trading on the Athens Stock Exchange remains appropriate and proportionate to address the above mentioned threats that persist in Greece and the duration of the measure is justified and appreciates the HCMC’s statement in its notification of intent whereby the measure may be lifted during the period of enforcement of the measure, if appropriate. (1/05/13) http://www.esma.europa.eu/system/files/2013-542.pdf

FCA: GC13/1 Proposed guidance on oversight of member controls carried out by recognised investment exchanges (RIEs) and multi-lateral trading facilities (MTFs)

This guidance consultation is in the form of a MarketWatch article entitled “Special member controls edition” and gives an overview of the approach FCA expects RIEs and MTFs to take to ensure an ongoing oversight of the systems and controls which their member firms operate in order to comply with the RIE’s or MTF operator’s rulebook. FCA notes that supervision work has shown that RIEs and MTFs are “currently defining and implementing their oversight responsibilities very differently”. Responses are required by 21 May 2013. (24/04/13) http://www.fca.org.uk/news/guidance-consultations/gc13-01

IOSCO: Addendum to report on investigating and prosecuting market manipulation

IOSCO has published this addendum to a 2000 report which is intended to provide useful references both to IOSCO’s work and experiences of members of IOSCO, to reflect present day financial market conditions. Specific topics covered

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include: types of manipulative conduct; tools for preventing market manipulation; investigating market manipulation; challenges in taking enforcement action against manipulation and cooperation between regulators. (23/04/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD411.pdf

IOSCO: Technological challenges to effective market surveillance: issues and regulatory tools

This final report provides an overview of current market surveillance regimes and identifies the main challenges that technological developments pose to these regimes. It also makes final recommendations to help market authorities develop the regulatory tools for addressing these challenges, particularly with respect to: improving surveillance capabilities on a cross-market and cross-asset basis; and making more useful to market authorities the data collected for surveillance purposes. New regulatory tools are considered, such as audit trail or surveillance data that permits the reconstruction of trades and order books; a single reporting point for transactions within a jurisdiction; and unique entity identifiers. (22/04/13) http://www.iosco.org/news/pdf/IOSCONEWS279.pdf http://www.iosco.org/library/pubdocs/pdf/IOSCOPD412.pdf (report - NB: over 80 pages long)

EC: Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)/ Proposal for a Regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories

Marked-up Presidency compromise texts dated 15 April 2013 has been published. (16/04/13) http://register.consilium.europa.eu/pdf/en/13/st07/st07744-re02.en13.pdf (NB: over 200 pages long) http://register.consilium.europa.eu/pdf/en/13/st07/st07743-re02.en13.pdf (NB: over 100 pages long)

ESMA: Peer review – money market fund guidelines

ESMA’s report looks at whether EU securities supervisors correctly apply ESMA’s guidelines on money market funds. It compared supervisory and enforcement practices for MMFs of 30 supervisory authorities across the EEA and reviewed those 20 jurisdictions that had transposed the guidelines into their national rules. The report found that more than two thirds of the 20 jurisdictions reviewed have implemented the ESMA guidelines on MMFs nationally as mandatory provisions, while a minority have used measures which do not have the force of law. However, the general supervisory and enforcement approaches relating to MMFs vary across Member States to a significant extent. (15/04/13) http://www.esma.europa.eu/system/files/2013-476_-_peer_review_-_money_market_fund_guidelines.pdf (NB: over 40 pages long)

EC: Proposal for a Regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories

A marked-up Presidency compromise text dated 8 April 2013 has been published. (11/04/13) http://register.consilium.europa.eu/pdf/en/13/st07/st07743-re01.en13.pd f (NB: over 100 pages only)

EC: Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)

A marked-up Presidency compromise text dated 8 April 2013 has been published. (10/04/13) http://register.consilium.europa.eu/pdf/en/13/st07/st07744-re01.en13.pdf

ESMA: ESMA’s technical advice to the Commission on fees for trade repositories

ESMA has published its final report in respect of the above, which sets out a summary of the responses received by ESMA regarding the fee structure for registration, supervision and recognition of trade repositories in the EU and includes ESMA’s final technical advice to the EC on the future Regulation on fees for trade repositories which will be adopted by the EC in the form of a delegated act. (4/04/13) http://www.esma.europa.eu/system/files/2013-302.pdf (NB: over 50 pages long)

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ESMA: Exemption for market making activities and primary market operations under Regulation (EU) 236/2012 of the European Parliament and the Council on short selling and certain aspects of Credit Default Swaps

ESMA has published the official translations of the above, first published on 1 February 2013. The publication of the translated guidelines triggers a transitional period of two months during which national supervisors have to declare whether they intend to comply with the guidelines, or otherwise explain the reasons for non-compliance. ESMA expects the guidelines to become effective and to be applied across the EU from 2 June 2013. (2/04/13) http://www.esma.europa.eu/system/files/esma2013-74_en.pdf

IOSCO: Responses to the second consultative paper on margin requirements for non-centrally cleared derivatives

IOSCO has published the responses to the above-mentioned paper, which are available to download individually via the following link. (2/04/13) http://www.iosco.org/library/index.cfm?section=pubdocs&publicDocID=403

IOSCO: Board meeting (21/22 March 2013)

IOSCO has announced the appointment of Greg Medcraft (chair of the Australian Securities and Investments Commission) as chairman of IOSCO. Howard I Wetson (Ontario Securities Commission) has been appointed vice chairman. The press release includes a synopsis of matters discussed at the board meeting, including new work themes and emerging risks. (1/04/13) http://www.iosco.org/news/pdf/IOSCONEWS273.pdf

ESMA: Speech by Stephen Majoor: EMIR: a fair price for safety and transparency (27 March 2013)

Text of this speech, given at an EMIR conference in the Hague, follows, in which he discusses the progress of EMIR in some detail as well as Lehman and AIG during the financial crisis. (27/03/13) http://www.esma.europa.eu/system/files/2013-428.pdf

ISDA: LIBOR currency/maturities discontinuations

ISDA has published a guidance note in respect of the above. (27/03/2013) http://www.isda.org/publications/pdf/LIBOR%20Discontinuations%20Guidelines%20-%20FINAL%20-%2025th%20March%20CLEAN.pdf

EC: The international treatment of central banks and public entities managing public debt with regard to OTC derivatives transactions

The report notes that, at the time of adoption of EMIR, there were uncertainties on the treatment of foreign central banks in the application of OTC derivatives reforms in other jurisdictions. The European Parliament and the Council therefore postponed a decision on the application of EMIR to third-country central banks until more clarity could be reached on this issue. The EC was requested to analyse the international treatment of central banks and of public bodies managing public debt in other jurisdictions’ legal framework and to inform the European Parliament and the Council of its comparative analysis three months after the entry into force of EMIR. This report concludes that the exemption of the monetary responsibilities of those third-country central banks from the clearing and reporting obligation is necessary, EMIR empowers the EC to adopt a delegated act to extend the list of exempted entities under EMIR. As Australia, Canada, Hong Kong and Switzerland proceed with finalising their rules, the EC will monitor and report on the latest developments with a view to also exempting their respective central banks and debt management offices on the basis of the rules that are currently proposed in those jurisdictions. In order to ensure that third country central banks and other public bodies charged with or intervening in the management of the public debt continue to perform adequately their tasks, other countries will also be considered in the future, as needed. Further amendments of Article 1(4) of EMIR to include countries not listed in this first report may, therefore, be expected. In the immediate future, no market disruption will be imposed on third countries that are not included in the first delegated act, since the obligations related to central clearing and risk mitigation techniques for uncleared trades have not yet entered into force in the EU. (25/03/13) http://ec.europa.eu/internal_market/financial-markets/docs/derivatives/130322_report-international-treatment-central-banks_en.pdf

EC: Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)/ Proposal for a Regulation of the

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European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories

Marked-up Presidency compromise texts dated 21 March 2013 have been published. (22/03/13) http://register.consilium.europa.eu/pdf/en/13/st07/st07744.en13.pdf (NB: over 200 pages long) http://register.consilium.europa.eu/pdf/en/13/st07/st07743.en13.pdf (NB: over 100 pages long)

IOSCO: Report on regulatory issues raised by changes in market structure

This consultation seeks to gather evidence and views for developing recommendations that promote market liquidity and efficiency, price transparency, and investors’ execution quality in a fragmented environment. The report proposes possible policy options and regulatory tools to cope with the potential drawbacks arising from market fragmentation. It concludes that securities regulators bear the responsibility for striking an appropriate balance between a market structure that promotes competition among markets, and one that minimizes the potentially adverse effects of fragmentation on market integrity and efficiency, price formation, and best execution of investor orders. The analysis carried out for the report included the following fact finding exercise: The report makes recommendations to monitor the impact of fragmentation on the following areas: market integrity and efficiency; trade information; on order handling rules and best execution; on access to liquidity and market efficiency and resilience. Responses are required by 10 May 2013. (21/03/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD407.pdf (NB: over 40 pages long)

The Uncertificated Securities (Amendment) Regulations 2013/632

These Regulations amend the Uncertificated Securities Regulations 2001 (S.I. 2001/3755) (“the 2001 Regulations”). The 2001 Regulations enable title to securities to be transferred without a written instrument and make provision in respect of the approval and regulation of operators of “relevant systems”, i.e. computer-based systems that allow for title for units of securities to be evidenced and transferred without a written instrument. The purpose of these Regulations is to transfer responsibility for the approval and regulation of operators of relevant systems from HMT to BoE. These Regulations also provide the Bank of England with new powers to require reports to be produced by skilled persons in respect of operators of relevant systems and to appoint investigators for the purpose of making inquiries about operators of relevant systems in appropriate cases. These Regulations also substitute a new Schedule 2 to the 2001 Regulations in order to replace provision regarding the prevention of restrictive practices with provision for the purpose of preventing operators of relevant systems from adopting and maintaining excessive regulatory provision. As a result of the substitution, operators of relevant systems will now be subject to the Competition Act 1998 without exemption and their rules and practices will be subject to the Bank of England’s ongoing scrutiny. (Date in force: 1/04/13) (20/03/13) http://www.legislation.gov.uk/uksi/2013/632/pdfs/uksi_20130632_en.pdf

ESMA: Q&A: Implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)

The paper provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of EMIR. It is noted that the content is aimed at competent authorities to ensure that their supervisory activities are converging along the lines set out in ESMA’s responses, but the document should also help investors and other market participants by providing clarity on EMIR’s requirements. (20/03/13) http://www.esma.europa.eu/system/files/2013-324.pdf

Parliamentary Commission on Banking Standards: Call for evidence on derivatives

PCBS is inviting written responses on whether the draft secondary legislation relating to the provision of derivatives by ring-fenced banks adequately addresses the concerns raised in its first report and sets out a number of questions covering issues with which it is most concerned. Responses are required by 27 March 2013. (19/03/13) http://www.parliament.uk/business/committees/committees-a-z/joint-select/professional-standards-in-the-banking-industry/news/call-for-evidence-on-derivatives/

ESMA Call for evidence on the evaluation of the Regulation on short selling and certain aspects of credit default swaps

ESMA has published the responses to the above-mentioned call for evidence, available to download individually via the following link. (19/03/13) http://www.esma.europa.eu/consultation/Call-evidence-evaluation-Regulation-short-selling-and-certain-aspects-credit-default-sw#responses

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ESMA: EMIR

ESMA notes that EMIR enters into force on 15 March 2013 and has published an information page on the Regulation which includes links to key documents. (15/03/`3) http://www.esma.europa.eu/page/European-Market-Infrastructure-Regulation-EMIR

ESMA: Guidelines and recommendations for establishing consistent, efficient and effective assessments of interoperability arrangements

These guidelines and recommendations set out ESMA’s view of how EU law should be applied in a particular area, or of appropriate supervisory practices within the European system of financial supervision. ESMA expects all relevant national competent authorities to comply with them. This final report also contains feedback received from ESMA’s December 2012 consultation and subsequent changes to the draft guidelines and recommendations made by ESMA. The guidelines and recommendations will become effective one month after their publication by ESMA on its website in the EU official languages. (15/03/13) http://www.esma.europa.eu/system/files/2013-323.pdf (NB: over 30 pages long)

ESMA: Guidelines on ETFs and other UCITS issues

ESMA has published this Q&A intended to promote common supervisory approaches and practices in the application of the UCITS Directive and its implementing measures, with a specific focus on the guidelines on ETFs and other UCITS issues. The Q&A are aimed at competent authorities under UCITS to ensure that in their supervisory activities their actions are converging along the lines of the responses adopted by ESMA. However, the answers are also intended to help UCITS management companies by providing clarity as to the content of the UCITS rules, rather than creating an extra layer of requirements.(15/03/13) http://www.esma.europa.eu/system/files/2013-927_qa_on_guidelines_on_etfs_and_other_ucits.pdf

Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories Regulations 2013/504

These Regulations implement certain Articles of Regulation (EU) 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ No L 201, 27.7.2012, p1) (“the EMIR regulation”). Part 2 amends Part 18 FSMA (recognised investment exchanges and clearing houses), in order to make the provisions concerning clearing houses compatible with the EMIR regulation. The Regulations create a new category of clearing house, known as a “recognised central counterparty”, which are those central counterparties which are subject to, and recognised pursuant to the provisions of, the EMIR regulation. Some provisions of Part 18 FSMA will no longer apply to these bodies and in many cases the requirements are replaced by requirements emanating from the EMIR regulation. Part 3 amends the Companies Act 1989 to implement and facilitate the provisions on segregation and portability of accounts in Articles 39 and 48 of the EMIR regulation. Part 4 amends the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001/995. The requirements relating to clearing houses in Part 3 of the Schedule are disapplied in relation to recognised central counterparties, and new Parts 5 and 6 are created which provide that the requirements of the EMIR regulation must be met in order for a body to gain recognition as a recognised central counterparty, together with the additional requirements set out in those Parts. In Part 5, regulation 6 designates the Bank of England as the competent authority under the EMIR regulation for central counterparties. In most cases, FCA is designated as competent authority under the EMIR regulation for financial and non-financial counterparties, trading venues, trade repositories and clearing members of central counterparties, but PRA has certain competent authority functions in relation to persons authorised by it. Regulation 7 grants powers to FCA to obtain information, and regulation 9 gives FCA power to impose penalties for contravening the EMIR regulation and certain provisions of the Regulations in order to implement Articles 12 and 22(3) of the EMIR regulation. Part 5 also makes provision with regard to applications and notifications to FCA under the EMIR regulation. Part 6 gives BoE enforcement powers in relation to the requirements in Article 31 of the EMIR regulation (acquisition of control over central counterparties). Part 7 makes provision to enable ESMA to gain access to telephone and data traffic records and make on-site inspections so that it may carry out its obligations under Title 6 of the EMIR regulation (registration and supervision of trade repositories). In each case the Authority must first obtain authorisation from the High Court, or in Scotland the Court of Session. Part 8 contains consequential amendments to primary and secondary legislation, and Part 9 makes transitional and saving provisions. (Date in force: 1/04/13) (13/03/13) http://www.legislation.gov.uk/uksi/2013/504/pdfs/uksi_20130504_en.pdf

FSA: Notifications and exemptions under EMIR – what you need to know

This webpage contains Information about the process for making notifications and the information that will need to be provided to FSA, including links to forms for non-financial counterparties exceeding/no longer exceeding the clearing threshold. These forms will become active from 15 March 2013. (13/03/13) http://www.fsa.gov.uk/about/what/international/emir/emir-notifications-and-exemptions

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ISDA: 2013 EMIR NFC Representation Protocol

The Protocol enables parties to amend the terms of their ISDA Master Agreements to reflect certain know your counterparty requirements, and the consequences of transacting on the basis of an incorrect classification, imposed by Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (EMIR). The Protocol is open to ISDA members and non-members. Parties will pay a one-time fee of $500 to ISDA to adhere to the Protocol. There is no cut-off date to this Protocol. ISDA does, however, reserve the right to designate a cut-off date by giving 30 days’ notice on this site. Text of the protocol and other materials are available from the link below. (12/03/13) http://www2.isda.org/functional-areas/protocol-management/protocol/11

ESMA: Consultation technical advice to the EC on fees for trade repositories

ESMA has now published the responses to this consultation, available to download via the following link. (8/03/13) http://www.esma.europa.eu/consultation/Consultation-ESMA’s-Technical-Advice-Commission-Fees-Trade-Repositories#responses

EBA: Good practices for the risk management of ETFs

EBA has published an opinion on the above, addressed to national supervisory authorities which aims to ensure that potential risks associated with ETFs are managed adequately from the perspective of the credit institution – and indirectly from the perspective of its customers. The document includes a list of relevant questions to assist authorities in gaining an accurate picture of banks’ involvement in the ETF business, and the adequacy of banks’ management of associated risks such as liquidity and market risks. (7/03/13) http://www.eba.europa.eu/cebs/media/Publications/Other%20Publications/Opinions/EBA-BS-2013-010--Opinion-of-the-EBA-on-Good-Practices-for-ETF-Risk-Management.pdf

EC: Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)/ Proposal for a Regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories

Marked-up Presidency compromise texts dated 1 March 2013 have been published. (5/03/13) http://register.consilium.europa.eu/pdf/en/13/st06/st06016-re02.en13.pdf (NB: over 200 pages long) http://register.consilium.europa.eu/pdf/en/13/st06/st06018-re02.en13.pdf (NB: over 100 pages long)

ESMA: EC extends deadline for ESMA advice on equivalence of non-EU rules with EMIR

The EC has extended the deadline for ESMA advice on the equivalence between non-EU legal and supervisory frameworks and EMIR. ESMA will now deliver its advice on Japan and the USA by 15 June 2013 and, for the remaining countries specified in the request by 15 July 2013. The original deadline was 15 March 2013. (4/03/13) http://www.esma.europa.eu/news/European-Commission-extends-deadline-ESMA-advice-equivalence-non-EU-rules-EMIR?t=326&o=home

FSA: Notification of the temporary prohibition of short selling

FSA has published a press release on the above, following a decision by CONSOB, in the shares of Banco Popolare, Mediolanum, Banca Carige shares and INTESA. This temporary prohibition for the duration of 27 February 2013 applies on all UK trading venues on which the above instruments are traded. The prohibition does not extend to those market makers who are legitimately undertaking market-making activities in these instruments and for which they have previously notified FSA of their intention to use the market maker exemption in these instrument. (27/02/12) http://www.fsa.gov.uk/library/communication/statements/2013/temporary-prohibition

FSA: Notifications and exemptions under EMIR – what you need to know

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FSA has published information about the process for making notifications and the information that will need to be provided to FSA during 2013, including specimen forms. (27/02/13) http://www.fsa.gov.uk/about/what/international/emir/emir-notifications-and-exemptions

ESMA: Technical advice to the Commission on fees for trade repositories

In January 2013, ESMA received a formal request from the EC to provide technical advice to assist it in formulating a Regulation on fees for trade repositories by a delegated act. ESMA is now conducting a shortened consultation on possible fee structures for trade repositories’ registration and supervision in the EU. For registration, ESMA is considering for its advice different fee bands based on objective criteria. For on-going supervisory fees, ESMA is considering for its advice a single periodic fee based on turnover of the trade repository relative to the turnover of other trade repositories registered in the EU. An option for a minimum supervisory fee is also considered. Responses to the consultation are required by 6 March 2013. ESMA intends to provide its advice to the EC by 31 March 2013. (20/02/13) http://www.esma.europa.eu/system/files/2013-219.pdf

ESMA: Trends, risks, vulnerabilities: Issue 1

ESMA has published its first report on trends, risks and vulnerabilities in EU securities markets in 2012 and a risk dashboard for Q4 2012 – it intends to publish the report on a semi-annual basis. The report notes improvement in the second half of the year in the markets, whilst systemic risk in EU securities markets decreased in Q4. However, risk indicators remained at high levels. With regard to vulnerabilities, ESMA highlights systemic risk implications with regard to hedge funds and prime brokers and collateral concerns in financial markets. (14/02/13) http://www.esma.europa.eu/system/files/2013-212.pdf (NB: over 30 pages long)

EC: Proposal for a Regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories/ Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)

Marked-up Presidency compromise texts dated 13 February 2013 have been published. (14/02/13) http://register.consilium.europa.eu/pdf/en/13/st06/st06018-re01.en13.pdf (NB: over 100 pages long) http://register.consilium.europa.eu/pdf/en/13/st06/st06016-re01.en13.pdf (NB : over 200 pages long)

ESMA: On the evaluation of the Regulation (EU) 236/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps

ESMA has published a call for evidence with regard to the above following receipt of a formal mandate from the EC seeking technical advice on the evaluation of the effects of the Short Selling Regulation. Responses from stakeholders are required by 15 March 2013. ESMA intends to deliver its advice by 31 May 2013. This will contribute to the EC’s Report on the review of the Short Selling Regulation, which it is obliged to present to the European Parliament and the European Council by 30 June 2013. (13/02/13) http://www.esma.europa.eu/system/files/2013-203.pdf

FSA: Speech by David Lawton: Four building blocks of efficient capital markets (1 February 2013)

Text of the following, given at the Practising Law Institute conference, follows. Topics include: ethical market behaviour, including market abuse regulation and surveillance; corporate governance; MiFID II; client assets regime. (5/02/13) http://www.fsa.gov.uk/library/communication/speeches/2013/0201-dl

EC: Proposal for a Directive of the European Parliament and of the Council on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)/ Proposal for a Regulation of the European Parliament and of the Council on markets in financial instruments and amending Regulation [EMIR] on OTC derivatives, central counterparties and trade repositories

Marked-up Presidency compromise texts dated 4 February 2013 have been published. (5/02/13) http://register.consilium.europa.eu/pdf/en/13/st06/st06016.en13.pdf (NB; over 200 pages long)

FSA: Speech by Patrick Spens: Monitoring orders and transactions – our expectations of firms (31 January 2013)

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Text of the above, given at FOA, follows. Topics include: FSA’s expectations of firms’ monitoring procedures; definition of “appropriate systems”’; direct market access providers; the Suspicious Transaction Reporting regime and ESMA guidelines and the recent enforcement action against Swift Trade. (4/02/13) http://www.fsa.gov.uk/library/communication/speeches/2013/0131-ps

ESMA: Protocol: operation of the ESMA MiFID database

This protocol concerns the practical cooperation arrangements between the national competent authorities and ESMA staff in order to manage the calculation and publication of MiFID market transparency calculations. (1/02/13) http://esma.europa.eu/system/files/2013-68.pdf

ESMA: Guidelines on the exemption for market making activities and primary market operations under Regulation (EU) 236/2012 of the European Parliament and the Council on short selling and certain aspects of Credit Default Swaps

Key elements covered by the Guidelines include the following: - In order to benefit from the market making exemption on a particular instrument, the market maker should be a

member of a trading venue on which the relevant financial instrument is admitted to trading and conduct market making there;

- For any instrument for which a notification of intent to use the exemption is made, the market maker should fulfil some general principles. For equities and equity derivatives, the Guidelines specify qualifying criteria to be considered by the authority which received the notification of intent in the assessment on whether to allow the use of the exemption or not;

- The process of notification of the intent to use the exemption and its content,; - Definition of the relevant competent authority to be notified, in particular a single entry point for notifying

entities from third countries; and - Notifications made before entry into force of the Guidelines will be reviewed within six months after application

of the Guidelines; Competent authorities to whom the guidelines apply should comply by incorporating them into their supervisory practices and ensure application by market participants. The authorities must notify ESMA whether they comply or intend to comply with the guidelines, explaining any reasons for non-compliance. The Guidelines will be translated into all the official EU languages and will be applicable two months after the translations are published. The feedback statement included in the document addresses a number of issues raised by respondents, (1/02/13) http://www.esma.europa.eu/system/files/2013-158.pdf (NB: 30 pages long)

ESMA: Q&A: implementation of the Regulation on short selling and certain aspects of credit default swaps (2nd update)

The purpose of the Q&A is to promote common supervisory approaches and practices amongst the EU’s national securities markets regulators on the requirements of the Short Selling Regulation, that came into force on 1 November 2012. Additional Q&As complement the sections relating to the scope of the Regulation including the treatment of ETFs and ADRs/GDRs, the calculation of net short position, the calculation and reporting for the specific situation of group and fund management activities and the treatment of derivatives on sovereign debt with respect to duration adjustment issue. A full new section is now dedicated to the application of the restriction on uncovered CDS positions. (30/01/13) http://www.esma.europa.eu/system/files/2013-159.pdf (NB: over 30 pages long)

ESMA: Opinion on the emergency measure by the Greek Hellenic Capital Market Commission under Section 1 of Chapter V of Regulation No 236/2012 on short selling and certain aspects of credit default swaps

The above-mentioned measure is expected to enter into force on 1 February 2013 at 8:30:00 hours (CET) and to be applicable until 24:00:00 (CET) on 30 April 2013. ESMA is adopting the following opinion on the notified measure, on the basis of Article 27(2) of Regulation 236/2012 on short selling and certain aspects of credit default swaps: It considers that there are adverse developments relating to the Greek banking sector which constitute a serious threat to financial stability and to market confidence in Greece; that it is appropriate and proportionate and considers the duration of the measure is justified. It is noted that HCMC has said that the measure may be lifted during the period of enforcement of the measure, if appropriate, (29/01/13) http://www.esma.europa.eu/system/files/2013-149.pdf

EC: Proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 1060/2009 on credit rating agencies/ Proposal for a directive of the European Parliament and of the Council amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings of collective investment in transferable securities (UCITS) and Directive 2011/61/EU on Alternative Investment Funds Managers in respect of the excessive reliance on credit ratings

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These documents discuss the European Parliament's first reading of the Credit Rating Agencies Regulation and relevant amendments on the UCITS and AIFM Directives on 14 -17 January 2013. Marked-up versions of the legislation to reflect the changes made by the amendments to the EC's proposals are provided. It is noted that the European Parliament's position reflects what had been agreed between the institutions and ought therefore to be acceptable to the European Council, which should be in a position to approve this once the text has been examined by “legal-linguistic experts”. (23/01/13) http://register.consilium.europa.eu/pdf/en/13/st05/st05251.en13.pdf (NB: over 130 pages long)http://register.consilium.europa.eu/pdf/en/13/st05/st05252.en13.pdf

FSA: New EU rules on derivatives trading – introduction to the EMIR technical standards

FSA has published a slide presentation on the above which was given by Tom Springbett of FSA’s OTC derivatives and post trade policy division covering the reporting requirement, clearing obligation, risk mitigation for uncleared trades and implementation. (16/01/13) http://www.fsa.gov.uk/static/documents/pubs/international/emir_implementation_presentation1.ppt

EBA/ESMA: EURIBOR

EBA and ESMA have published the results of their joint work on EURIBOR and have set out proposals for benchmark rate-setting processes. The publications include a review of EURIBOR’s administration and management and clear recommendations to EEBF to improve the governance and transparency of the rate-setting process; formal EBA recommendations to national authorities on the supervisory oversight of banks participating in the EURIBOR panel; and a joint EBA/ESMA consultation on principles for benchmark setting processes in the EU which establish a framework for the conduct of benchmark rate-setting and the activities of participants in the process. EBA/ESMA highlight a number of weaknesses in the current process. It notes the steering committee, responsible for the governance of the rate-setting process, is not sufficiently independent as a majority of its members come from the panel banks; criticizes EEBF for not assuming sufficient direct responsibility and control on the process; suggests that the definition of EURIBOR is unclear and ambiguous; rates are not assessed sufficiently against evidence from real transactions and notes that no formal requirements exist for EURIBOR panel banks to have adequate internal governance, a code of conduct and conflicts of interest management in relation to the submission process and set out suggestions on how EEBF should improve processes, with a view to reviewing the implementation of their recommendations within six months. EBA has set out recommendations on supervisory oversight of activities related to banks’ participation in the EURIBOR panel addressed to national supervisory authorities which focus on strengthening the panel banks’ internal governance arrangements, including a code of conduct. This should improve the identification and management of conflicts of interest, internal control arrangements including audits, record keeping and comparison with actual transactions. The EBA/ESMA principles with regard to benchmark setting processes include a general framework for benchmarks settings (calculation methodology, governance, supervision, transparency of the methodology, contingency plans etc.) and provide guidance to firms involved in benchmark data submissions and to benchmark administrators, calculation agents, publishers and users. Responses to the consultation are required by 15 February 2013. (11/01/13) http://www.eba.europa.eu/News--Communications/Year/2012/ESMA-and-the-EBA-take-action-to-strengthen-Euribor.aspx http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/EBA-BS-2013-001--Euribor---Recommendations-to-EBF--final.pd f (recommendations to EEBF) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/EBA-BS-2013-002-Annex-1--Euribor---Report--final.pdf (report on administration and management of EURIBOR) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/EBA-BS-2013-005--Euribor---EBA-recommendation-to-NSAs--final.pd f (recommendations to national supervisory authorities) http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/JC-CP-2013-01-Consultation-Paper-on-Principles-on-Benchmark-Rate-Setting-in-the-EU.pdf (benchmark setting consultation)

IOSCO: Financial benchmarks

This consultation report discusses concerns regarding the potential inaccuracy or manipulation of benchmarks and identifies benchmark-related policy issues across securities and derivatives and other financial sectors including: the appropriate level of regulatory oversight of the process of benchmarking; standards that should apply to methodologies for benchmark calculation; credible governance structures to address conflict of interests in the benchmark setting process within the reporting financial institutions as well as in the oversight bodies; and the appropriate level of transparency and openness in the benchmarking process. It also looks at issues that market participants might confront when seeking to make the transition to a new or different benchmark. Responses are required by 11 February 2013. (11/01/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD399.pdf (NB: over 50 pages long)

Clearing and settlement, moving OTC derivatives onto exchange/central counterparties – regulatory “wholesale products” EC: Proposal for a Regulation of the European Parliament and of the Council on improving securities settlement in the European Union and on central securities depositories (CSDs) and amending Directive 98/26/EC

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This item reports that notes that the Council has approved an agreement reached with the European Parliament on the above (it includes a link to amended text). (26/02/14) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/141199.pdf

ESMA: List of CCPs established in non-EEA countries which have applied for recognition under Article 25 of EMIR

ESMA has published an updated list of CCPs established in non-EEA countries which have applied for recognition under Article 25 of EMIR and which expressly agreed to have their name mentioned publicly. ESMA emphasises that the list is not necessarily exhaustive and it remains subject to further updates. (24/02/14) http://www.esma.europa.eu/system/files/list_of_applicants_tc-ccps_version_24_february_2014_0.pdf

ESMA: Implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)

ESMA has updated its Q&A document, with new items marked in red text. Specific topics considered in these updated Q&As include clarification of issues related to reporting to trade repositories such as on how to construct and generate unique trade identifiers, the reporting of empty/not available fields; the unique product identifier taxonomy; OTC derivatives and CCP requirements. (12/02/14) http://www.esma.europa.eu/system/files/2014-164_qa_vi_on_emir_implementation_-_11_february_14.pdf

FCA: EMIR reporting – is the industry ready?

This factsheet is for counterparties looking to comply with EMIR and sets out findings from a recent review FCA undertook in order to find out how ready the industry is for the reporting obligation due to start on 12 February 2014 and to identify challenges that could affect the completeness and accuracy of the reports. FCA notes that, overall, it appears that most firms will be reporting their derivative contracts from the start date, but provides information on a few issues which came to light as a result of the review. (11/02/14) http://www.fca.org.uk/static/documents/factsheets/implementation-review-reporting-factsheet.pdf

FCA: Non-financial counterparties subject to EMIR

This factsheet is for non-financial counterparties calculating the clearing threshold and complying with EMIR and which are a part of a group with entities that are financial counterparties. FCA notes that, following a review it conducted to understand how non-financial counterparties are defining their hedging activity and monitoring their status against the clearing threshold, it extended the review to include non-financial counterparties that are part of a group with entities that are financial counterparties. This document sets out findings from both parts of the review. (11/02/14) http://www.fca.org.uk/static/documents/factsheets/non-financial-counterparties-factsheet.pdf

IOSCO/BIS: Public quantitative disclosure standards for central counterparties

Responses to the above-mentioned consultation have now been published and may be downloaded via the following link. (7/02/14) http://www.iosco.org/library/index.cfm?section=pubdocs&publicDocID=425

FSB: Feasibility study on approaches to aggregate OTC derivatives data

FSB has published this consultation responding to a request from G20 leaders and discusses key requirements and challenges involved in the aggregation of trade repositories’ data and sets out criteria for assessing different aggregation models. Responses are required by 28 February 2014. Following this consultation and further analysis by the study group, a finalised version of the report will be published. (5/02/14) http://www.financialstabilityboard.org/publications/r_140204.htm http://www.financialstabilityboard.org/publications/r_140204.pdf

FCA: Speech by David Lawton: Price – the cornerstone of markets (3 February 2014)

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Text of the above, given at ICMA, follows. Topics include: strengthening public markets; decentralised markets and pricing mechanisms outside markets. (4/02/14) http://www.fca.org.uk/news/price-the-cornerstone-of-markets

ESMA: Supplement to the final report - technical advice on third country regulatory equivalence under EMIR – Japan

Further to advice sent in September 2013, ESMA has published a supplement to its advice to the EC on the equivalence of the regulatory regime for CCPs of Japan with EMIR. Specifically, it sets out ESMA’s advice with regard to the equivalence between the Japanese regulatory regime for commodity CCPs and the EU regulatory regime under EMIR in respect of the recognition of third country CCPs. (30/01/14) http://www.esma.europa.eu/system/files/2014-esma-123_-_esma_technical_advice_on_equivalence_of_japan_for_ccp_ii__-_commodities_ccps.pdf

ESMA: List of central counterparties established in non-EEA countries which have applied for recognition under Article 25 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, CCPs and trade repositories (TRs) (EMIR)

ESMA has listed those CCPs established in non-EEA countries which have applied for recognition under Article 25 of EMIR and which expressly agreed to have their name mentioned publicly. It is emphasised that the list is not necessarily exhaustive and it remains subject to further updates. (30/01/14) http://www.esma.europa.eu/system/files/list_of_applicant_tc-ccps_version_30_january_2014.pdf

EBA: Final draft technical standards on the reporting of the hypothetical capital of a CCP

The final draft standards specify calculations and reporting frequencies and templates for the information relating to hypothetical capital that a CCP has to deliver to all the credit institutions and investment firms that are clearing members for the purpose of calculating their own capital requirements. The same information has to be reported to the competent authorities. Documents may be downloaded via the following link. (20/12/13) http://www.eba.europa.eu/-/eba-publishes-final-draft-technical-standards-on-the-reporting-of-the-hypothetical-capital-of-a-central-counterparty-ccp -

ESMA: Q&A: Risk measurement and calculation of global exposure and counterparty risk for UCITS

ESMA has published a new version of this document which now includes a Q&A on calculation of counterparty risk for exchange-traded derivatives and centrally-cleared OTC transactions. (20/12/13) http://www.esma.europa.eu/system/files/2013-1950_qa_risk_for_ucits.pdf

ESMA: Q&A: implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)

ESMA has published an updated version of its Q&A on the implementation of EMIR, with new items indicated in red text. (20/12/13) http://www.esma.europa.eu/system/files/2013-1959_qa_on_emir_implementation.pdf

IOSCO: Recognition of Asia Pacific CCPs under EMIR

IOSCO has published the text of a letter to Michel Barnier, raising a number of concerns on the issue and requesting clarity on various points. It advocates the adoption of an implementing act to extend transitional relief by six months in order that non-EU CCPs continue to qualify as QCCPs from 14 June 2014 to 15 December 2014. (27/11/13) http://www.iosco.org/committees/aprc/pdf/20131122_APRC_letter_to_EU.pdf

BoE: Assessing the adequacy of CCPs’ default resources

This BoE financial stability paper proposes a methodology whereby daily data on a CCP’s member exposures may be used to form a statistical model of the risk arising from CCPs’ exposures to their members. It is suggested that this may offer a tool with which CCPs, their members and their regulators, could assess the adequacy of CCPs’ total default resources and quantify the trade-off that occurs in the balance of resources between initial margin and default funds. It may also provide a technique to estimate the relative risk borne by clearing members on their CCP default fund contributions. (15/11/13) http://www.bankofengland.co.uk/publications/Documents/fsr/fs_paper26.pdf

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FCA: Statement on LME

In the light of LME’s recent initiatives with regard to its warehousing arrangements to manage potential conflicts of interest arising from the ownership of warehouses and to reduce queue lengths, FCA notes that it has “engaged” with the exchange to ensure these changes are consistent with its regulatory obligations. (8/11/13) http://www.fca.org.uk/news/firms/statement-london-metal-exchange

ESMA: Trade repositories

ESMA has announced the approval of the registrations of the first four trade repositories under EMIR. These are: DTCC Derivatives Repository Ltd, Krajowy Depozyt Papierów Wartosciowych S.A., Regis-TR S.A. and UnaVista Ltd. (7/11/13) http://www.esma.europa.eu/news/PRESS-RELEASE-ESMA-registers-DDRL-KDPW-Regis-TR-and-UnaVista-trade-repositories?t=326&o=home

ESMA: List of CCPs established in non-EEA countries which have applied for recognition under Article 25 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, CCPs and trade repositories (TRs) (EMIR)

ESMA has published a list of CCPs established in non-EEA countries which have applied for recognition under Article 25 of EMIR and which expressly agreed to have their name mentioned publicly. It is emphasised that the list is not necessarily exhaustive and it remains subject to further updates. (6/1/13) http://www.esma.europa.eu/system/files/2013-1581_list_of_applicant_tc-ccps_published_on_6_november_2013_v2.pdf

ESMA: Implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)

ESMA has updated its Q&A, which provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of EMIR. Modified responses are indicated in red.(22/10/13) http://www.esma.europa.eu/system/files/2013-1527_emir_questions_and_answers_2013_m10_d22.pdf (NB: over 50 pages long)

EC: Commission Delegated Regulation (EU) No 1002/2013 of 12 July 2013 amending Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to the list of exempted entities

This has been published in the Official Journal. (21/10/13) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:279:0002:0003:EN:PDF

EC: Commission Delegated Regulation (EU) of 12 July 2013 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to fees charged by the European Securities and Markets Authority to trade repositories

This has been published in the Official Journal. (21/10/13) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:279:0004:0009:EN:PDF

BIS/IOSCO: Public quantitative disclosure standards for central counterparties.

BIS/IOSCO have published this consultation paper, further to the disclosure framework which appeared in December 2013. The consultation sets out guidance on the quantitative data that a CCP should disclose more frequently and, together with the disclosure framework, is intended to ensure that stakeholders are able to compare CCP risk controls, including financial condition and financial resources to withstand potential losses ;have a clear, accurate and full understanding of the risks associated with a CCP; understand and assess a CCP’s systemic importance and its impact on systemic risk and understand and assess the risks of participating in CCPs. Responses are required by 13 December 2013. (15/10/13) http://www.iosco.org/news/pdf/IOSCONEWS301.pdf http://www.bis.org/publ/cpss114.pdf

EC: Trade repositories and OTC derivatives:

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This item includes a note which states that the Council has decided not to object to an EC regulation with regard to fees charged by ESMA to trade repositories and to a regulation on OTC derivatives, central counterparties and trade repositories with regard to the list of exempted entities. The regulation is a delegated act pursuant to article 290 of the Treaty on the Functioning of the EU. This means that now that the Council has given its consent, the act can enter into force, unless the European Parliament objects to it. (14/10/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/trans/138977.pdf

FCA: EMIR web portal

FCA’s EMIR web portal is now available for financial counterparties to make dispute notifications. Since 15 September 2013, financial counterparties have been required to report any disputes between counterparties relating to an OTC derivative contract, its valuation or the exchange of collateral for an amount or a higher value than €15m and outstanding for at least 15 business days. FCA requires financial counterparties to ensure that by the 15th of each month any disputes outstanding in the previous month have been reported through the EMIR web portal. The deadline for reporting disputes outstanding between 15 September and 30 September has been extended by one week to 22 October, to make sure there is enough time for counterparties to register. (8/10/13) http://www.fca.org.uk/firms/markets/international-markets/emir

FCA: EMIR notifications and exemptions

FCA sets out details on active and future notifications. The former comprise reporting disputes between counterparties; non-financial counterparties exceeding the clearing threshold and reporting outstanding confirmations. The latter comprise: intra-group clearing exemptions; intra-group margin requirements exemption; pension scheme arrangements and IORPs. The page also updates on FCA’s development of an EMIR web portal for counterparties to electronically submit notifications for disputes under article 15(2) of the OTC derivative technical standards; notifications for non-financial counterparties exceeding the clearing threshold (article 10(1) EMIR); and notifications for intra-group exemptions from clearing (article 4(2) EMIR. (2/10/13) http://www.fca.org.uk/firms/markets/international-markets/emir/emir-notifications-and-exemptions

ESMA: Technical advice on third country regulatory equivalence under EMIR

ESMA has now published its equivalence assessments of the regulatory regimes of Canada, India and South Korea and supplements to its equivalence assessments for Australia, Hong Kong, Singapore and Switzerland. ESMA considers third-country regimes equivalent where the legal provisions and the level of supervision and enforcement is similar to that of EMIR. Besides Hong Kong and Switzerland, conditional equivalence is proposed to the other third-country regimes. These are available to download via the following link. (2/10/13) http://www.esma.europa.eu/page/Post-trading-documents

ESMA: EC revises delivery date for ESMA standards on cross-border application of EMIR

ESMA has announced that the EC has extended the deadline within which ESMA should deliver its draft technical standards on the cross-border application of EMIR (Art. 4(4) and 11(14)) to 15 November 2013 (the original delivery deadline was 25 September 2013). The extension was granted in order to give ESMA more time to fully analyse responses to its public consultation which closed on 16 September 2013. (26/09/13) http://www.esma.europa.eu/news/EC-revises-delivery-date-ESMA-standards-cross-border-application-EMIR-15-November?t=326&o=home http://www.esma.europa.eu/system/files/gallaae_2013.09.16_14.41.39_5c4n7472_1.pdf

EC: Proposal for a Regulation of the European Parliament and of the Council on improving securities settlement in the European Union and on central securities depositories (CSDs) and amending Directive 98/26/EC

This press release notes that the European Council has agreed its position on the above, which will enable the Presidency to negotiate with the European Parliament with the aim of adopting the regulation at first reading. The regulation also needs to be in place for the Target2-Securities initiative to begin operating as planned in 2015. (26/09/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/138822.pdf

EC: Proposal for a Regulation of the European Parliament and of the Council on improving securities settlement in the European Union and on central securities depositories (CSDs) and amending Directive

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98/26/EC

A marked-up Presidency compromise text dated 23 September 2013 has been published. (25/09/13) http://register.consilium.europa.eu/pdf/en/13/st13/st13748.en13.pdf (NB: over 150 pages long)

FCA: Speech by Martin Wheatley: Future into focus (19 September 2013)

Text of the above, given at the ISDA conference, follows. Topics include: the cross-border application of derivatives rules; collateralisation of bilateral derivatives; EMIR implementation and benchmarking. (19/09/13) http://www.fca.org.uk/news/future-into-focus

EC: Commission Delegated Regulation (EU) No 876/2013 of 28 May 2013 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on colleges for central counterparties

This has now been published in the Official Journal. (13/0913) http://new.eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=oj:JOL_2013_244_R_0019_01&from=EN

BIS: Speech by Stephen G Cecchetti: Assessing the macroeconomic impact of OTC derivatives regulatory reforms (12/13 September 2013)

Text of the above, given at a conference on OTC derivatives reform in Johannesburg, follows. He discusses the work of the Macroeconomic Assessment Group on Derivatives (MAGD), which worked with member institutions of FSB on this topic, setting out its analytical approach and its findings. He concludes: “the economic benefits of derivatives market reforms are likely to exceed their costs. And, as central clearing is important to realising these benefits, regulators and market participants must work to clear as many OTC derivatives as possible centrally, with either a modest number of central counterparties or central counterparties that interoperate. This should include efforts to harmonise the rules governing cross-border transactions so that market participants have equal access to CCPs”. (12/09/13) http://www.bis.org/speeches/sp130912.pdf

ECB: Speech by Benoît Cœuré: Four years after Pittsburgh: what has OTC derivatives reform achieved so far? (11 September 2013)

Text of the above, given at the ECB/BoE/Banque de France in Paris. Specific aspects of OTC derivatives reform discussed include: lack of transparency, challenges remaining in central clearing and inconsistencies in cross-border application. (11/09/13) http://www.ecb.europa.eu/press/key/date/2013/html/sp130911.en.html

FCA: Statement about broker-operated systems trading physically settled gas and power forwards

In this statement, FCA notes that there is currently no common view among market participants on the correct characterisation of trading taking place on broker-operated systems offering a market in physically settled gas and power forwards that are traded on MTFs and is in discussions with brokers offering a market in gas and power forwards about the appropriate classification of their systems. The brokers are currently reviewing the functionalities offered by their systems to ensure clear distinctions between the MTF and non-MTF services they provide. This review and implementation of any changes must be finalised before 16 December 2013. By the end of this period, brokers must be able to satisfy the FCA that they have taken all necessary steps, including the implementation of any systems changes, to differentiate between their MTF and non-MTF services. In light of this review, FCA will not expect market participants to characterise trading in gas and power forwards that takes place before 16 December 2013 in a way different to their existing interpretations. (11/09/13) http://www.fca.org.uk/news/statement-about-broker-operated-systems-trading-physically-settled-gas-and-power-forwards

EC: Proposal for a Regulation of the European Parliament and of the Council on improving securities settlement in the European Union and on central securities depositories (CSDs) and amending Directive 98/26/EC

A marked-up Presidency compromise text dated 18 July 2013 has now been published. This was discussed at a working party meeting on 24 July 2013. (5/09/13) http://register.consilium.europa.eu/pdf/en/13/st12/st12496.en13.pdf (NB: over 100 pages long)

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ESMA: Advice on the equivalence of the regulatory regimes for OTC derivatives clearing, central counterparties and trade repositories of non-EU countries with EMIR

ESMA has assessed the equivalence of the regulatory regimes of Australia, Hong Kong, Japan, Singapore , Switzerland and the USA . The third-country rules were compared with EMIR requirements for central clearing, reporting, CCPs, trade repositories and non-financial counterparties as well as risk mitigation techniques for uncleared trades. ESMA considers third-country regimes equivalent where the legal provisions and the level of supervision and enforcement is similar to that of EMIR. ESMA finds the regulatory regimes of Australia and Switzerland for CCPs equivalent to EU rules. Conditional equivalence is proposed to the following regimes: Hong Kong, Japan, Singapore, and the US for CCPs; the USA and Japan for central clearing, requirements for non-financial counterparties and risk mitigation techniques for uncleared trades; and the USA for trade repositories. ESMA notes that the EC is expected to use ESMA’s technical advice to prepare possible equivalence decisions. Where it adopts such a decision, certain provisions of EMIR may be disapplied in favour of equivalent third-country rules and, depending on the specific area determined to be equivalent, ESMA may: recognise within the EU a CCP which is authorised outside the EU; or recognise within the EU a trade repository which is authorised outside the EU. For Australia, Canada, Hong Kong, India, Singapore, South Korea and Switzerland, ESMA will be delivering its advice on areas not yet covered by 1 October 2013. CCPs from third-countries that want to continue to be offering clearing services directly to EU clearing members will have to apply for ESMA recognition by 15 September 2013. (3/09/13) http://www.esma.europa.eu/system/files/2013-1169_press_release_esma_advises_commission_on_equivalence_of_non-european_derivatives_rules.pdf http://www.esma.europa.eu/system/files/2013-1163_letter_to_ec_technical_advice_on_third_country_regulatory_equivalence_under_emir.pdf http://www.esma.europa.eu/system/files/2013-1159_technical_advice_on_third_country_regulatory_equivalence_under_emir_australia.pdf (NB: over 100 pages long) http://www.esma.europa.eu/system/files/2013-1160_technical_advice_on_third_country_regulatory_equivalence_under_emir_hong_kong.pdf (NB: over 70 pages long) http://www.esma.europa.eu/system/files/2013-1158_technical_advice_on_third_country_regulatory_equivalence_under_emir_japan.pdf (NB: over 100 pages long) http://www.esma.europa.eu/system/files/2013-1161technical_advice_on_third_country_regulatory_equivalence_under_emir_singapore.pd f (NB: over 70 pages long) http://www.esma.europa.eu/system/files/2013-1162_technical_advice_on_third_country_regulatory_equivalence_under_emir_switzerland.pdf (NB: over 70 pages long) http://www.esma.europa.eu/system/files/2013-1157_technical_advice_on_third_country_regulatory_equivalence_under_emir_us.pdf (NB: over 200 pages long)

FSB: OTC derivatives reforms progress report to G20 leaders/Sixth progress report on implementation

FSB has published these reports, which also discuss areas where further work is needed to complete the reforms and achieve the G20 objectives, including: increased use of central clearing, and a renewed focus on the commitment to increase the use of exchanges and electronic trading platforms; establishment of resolution regimes for FMIs, including CCPs; continued work by regulators to cooperate in the application of regulations in cross-border contexts, to enable them to defer to each other’s rules where these achieve similar outcomes; greater clarity from regulators regarding the detailed rules on the treatment of cross-border transactions and the timetables for implementation; and ensuring that authorities can make full use of the data collected by trade repositories in fulfilling their financial stability mandates, including via the aggregation of TR data. FSB will publish its next progress report in April 2014. (2/09/13) http://www.financialstabilityboard.org/publications/r_130902a.pdf http://www.financialstabilityboard.org/publications/r_130902b.pdf (NB: over 100 pages long)

BIS/IOSCO: Margin requirements for non-centrally cleared derivatives - final document

This report sets out the final framework for margin requirements for non-centrally cleared derivatives. It has been designed to reduce systemic risks related to OTC derivatives markets, as well as to provide firms with appropriate incentives for central clearing while managing the overall liquidity impact of the requirements. The final requirements have been developed taking into account feedback from two rounds of consultation, as well as a QIS. A number of modifications have been introduced as a result of the consultation process. The requirement to collect and post initial margin on non-centrally cleared trades will be phased in over a four-year period, beginning in December 2015 with the largest, most active and most systemically important derivatives market participants. (2/09/13) http://www.bis.org/publ/bcbs261.pdf (NB: over 30 pages long)

BIS: Macroeconomic impact assessment of OTC derivatives regulatory reforms

This report assesses and compares the economic benefits and costs of the planned OTC derivatives regulatory reforms, concentrating on consequences for output in the long run, ie when the reforms have been fully implemented and their full economic effects realised. The main beneficial effect is a reduction in forgone output resulting from a lower frequency of financial crises propagated by OTC derivatives exposures, while the main cost is a reduction in economic activity

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resulting from higher prices of risk transfer and other financial services.(27/08/13) http://www.bis.org/publ/othp20.pdf (NB: over 70 pages long)

FCA: FG13/6: Market Operators’ oversight of member firm compliance with rules

This finalised guidance gives an overview of FCA’s overview of the approach it expects RIEs and firms operating MTFs to take to ensure ongoing oversight of the systems and controls which their member firms operate to comply with the RIE’s or MTF operator’s rulebook. This applies to RIES operating MTFs as well as their RIE operations. It includes a feedback statement to the guidance consultation published in April 2013. FCA states that it has had follow-up conversations with four of the five respondents to the consultation, given a presentation to FCA’s Practitioners’ Surveillance Group and has encouraged market participants to share best practice and experience with each other in order to ensure more effective reviews. (23/08/13) http://www.fca.org.uk/static/documents/finalised-guidance/fg13-06.pdf

IOSCO/BIS: Authorities' access to trade repository data

This report provides guidance to trade repositories and authorities on the principles that should guide authorities' access to data held for typical and non-typical data requests. The report describes the expected data access needs of authorities and sets out possible approaches to addressing procedural and legal constraints to data access as well as confidentiality concerns. (12/08/13) http://www.bis.org/publ/cpss110.pdf (NB: over 40 pages long)

IOSCO/BIS: Implementation monitoring of PFMIs – Level 1 assessment

It is noted that IOSCO and BIS have started the process of monitoring implementation of the principles for financial market infrastructures (PFMIs) . This report reviews jurisdictions' progress towards adopting the legislation and other policies that will enable them to completely implement the 24 Principles for FMIs and the responsibilities for authorities included in the PFMIs. Future assessments will evaluate the consistency of implementation measures in each jurisdiction with the PFMIs and will evaluate consistency of outcomes among FMIs themselves resulting from the application of the PFMIs. The report indicates that most jurisdictions have begun the process of implementation and that although few have completed the process many are making good progress and expect to be well advanced by the end of 2013. 12/08/13) http://www.bis.org/publ/cpss111.pdf (NB: over 60 pages long)

FSB: Application of the key attributes of effective resolution regimes to non-bank financial institutions/ Information sharing for resolution purposes

FSB has published consultations on the key attributes of effective resolution regimes for financial institutions to non-bank financial institutions and on principles governing information sharing for resolution purposes. The proposed guidance is designed to assist jurisdictions and authorities in implementing the key attributes with respect to resolution regimes for financial market infrastructures (including CCPs, central securities depositories and securities settlement systems), insurers and firms with holdings of client assets. The proposed guidance on this accompanies the BIS/IOSCO paper published today. The guidance on resolution of insurers complements the recent guidance published by IAIS. Responses are required by 15 October 2013. (12/08/13) http://www.financialstabilityboard.org/press/pr_130812.pd f http://www.financialstabilityboard.org/publications/r_130812a.pd f (NB: over 50 pages long) http://www.financialstabilityboard.org/publications/r_130812b.pdf

IOSCO/BIS: Recovery of financial market infrastructures

The report provides guidance to financial market infrastructures such as CCPs on how to develop plans to enable them to recover from threats to their viability and financial strength that might prevent them from continuing to provide critical services to their participants and the markets they serve. It also provides guidance to relevant authorities in carrying out their responsibilities associated with the development and implementation of recovery plans and tools. Responses are required by 11 October 2013. (12/08/13) http://www.bis.org/publ/cpss109covernote.pdf http://www.bis.org/publ/cpss109.pdf (NB: over 30 pages long)

The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (No. 2) Regulations 2013/1908

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These Regulations make further provision to implement EMIR. Regulation 2 amends the Companies Act 1989 to facilitate the segregation of indirect client accounts at a clearing member and the transfer of indirect client accounts on the failure of a client providing indirect clearing services. An indirect client is a client of a client of a clearing member. Regulation 3 amends the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001/995) (“the Recognition Requirements Regulations”) which set out the recognition requirements that investment exchanges and clearing houses must satisfy in order to be or to remain recognised by the appropriate regulator under s290 FSMA. Regulation 3 amends the Recognition Requirements Regulations so as to include the following new requirements: Clearing houses which provide clearing services without doing so as a central counterparty must maintain recovery plans specifying the steps they will take in order to maintain the continuity of their exempt activities if such continuity is threatened. Clearing houses which act as central counterparties must have in place effective arrangements for the allocation of losses arising for reasons other than member default; they must have in place plans for maintaining the provision of certain specified services when the continuity of service provision is threatened and must include in their default rules provision allocating losses that arise as a result of member default and which are not covered by the provision made in Article 45 of the EMIR regulation. Regulation 4 amends the Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013/504 to give FCA power to obtain information from third country entities for which it has supervisory responsibilities; to give FCA power to direct the manner of making and content of reports to be made to FCA under Commission Delegated Regulation (EU) No 149/2013 of 19 December 2012; to give FCA power to publish a statement of censure as an alternative to imposing a penalty for certain contraventions of the EMIR regulation or its implementing legislation; to require BoE to give notice before removing a member of the board of directors of a recognised central counterparty under Article 31(1) of the EMIR regulation, and to give a person so removed and the recognised central counterparty concerned the right to refer the matter to the Upper Tribunal. Regulation 5 alters the implementation of Article 38(3) of MiFID Article 38(3) is transposed by Chapter 1A of Part 18 FSMA (control over recognised investment exchange), and regulation 5 prevents Chapter 1A from applying to overseas investment exchanges. Regulation 6 makes transitory provision for recognised clearing houses which are applying for authorisation under the EMIR regulation, where the applications have not been determined by 1/02/14 or 1/05/13 (Date in force: 1/02/14 (for the purposes of regulation 3, insofar as that regulation inserts paragraphs 29B and 36 into the Schedule to the Recognition Requirements Regulations); 1/05/14(for the purposes of regulation 3, insofar as that regulation inserts paragraphs 23A and 29A into the Schedule to the Recognition Requirements Regulations; and 26/08/13 (for all other purposes). (5/08/13) http://www.legislation.gov.uk/uksi/2013/1908/pdfs/uksi_20131908_en.pdf

ESMA: Q&A – implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR)

The purpose of this document is to promote common supervisory approaches and practices in the application of EMIR. It provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of EMIR. New items are highlighted in red. (5/08/13) http://www.esma.europa.eu/system/files/2013-1080_qa_iii_on_emir_implementation.pdf (NB: over 60 pages long)

FCA: Guidelines for investment firms using Trade Data Monitors (TDMs)

FCA sets out guidelines for firms which use trade publication arrangements covering areas such as security, dissemination, identification of potentially erroneous information and correction of trade information. It also includes contact details for the post-trade reporting arrangements which have been confirmed, either by FCA or by an external auditor, as enabling firms to meet the guidelines. (1/08/13) http://www.fca.org.uk/static/fca/documents/tmd-fca-guidelines.pdf

EC: Derivatives

In this press release, it is noted that the Council decided not to oppose adoption by the EC of a regulation on technical standards on colleges for CCPs, saying that the regulation can now be adopted unless the European Parliament objects. (29/07/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/138317.pdf

ESMA: Draft regulatory technical standards on contracts having a direct, substantial and foreseeable effect within the Union and non-evasion of provisions of EMIR

ESMA has published this consultation, aimed at implementing the provisions of EMIR related to OTC derivative transactions by non-EU counterparties in certain cases, and aimed at preventing attempts by non-EU counterparties to evade EMIR’s provisions. It clarifies the conditions where EMIR’s provisions regarding central clearing or risk mitigation techniques would apply to OTC derivatives by two non-EU counterparties which have a direct, substantial and foreseeable effect in the EU. The proposed standards would only apply when two counterparties to the same transaction are established outside the EU, their jurisdictions’ rules are not considered equivalent to EMIR, and where one of the following conditions are met: one of the two non-EU counterparties is guaranteed by an EU financial counterparty for at least €8bn of the gross notional amount of OTC derivatives entered into and for an amount of at least 5% of the OTC

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derivatives exposures of the EU financial counterparty; or the two non-EU counterparties execute their transactions via their EU branches. Responses to the consultation are required by 16 September 2013. (17/07/13) http://www.esma.europa.eu/system/files/2013-892_draft_rts_of_emir.pdf (NB: over 30 pages long)

FCA: EMIR

FCA has updated its EMIR page, comprising short notes on the agreement between the EC and CFTC announced last week on the cross border treatment of OTC derivatives and on the reporting of interest rate and credit default swaps. It is noted that the start date for reporting interest rates and credit default swaps to trade repositories under EMIR is now expected to be 1 January 2014. (16/07/13) http://www.fca.org.uk/firms/markets/international-markets/emir

EC: Speech by Michel Barnier: Interdependent swaps markets need interactive cross-border rules (15 July 2013)

Text of the above, given at the Brookings Institution, follows, in which Michel Barnier discusses the EC/CFTC agreement announced last week. (15/07/13) http://europa.eu/rapid/press-release_SPEECH-13-638_en.htm?locale=en

ESMA: The clearing obligation under EMIR

ESMA has launched a DP to prepare the regulatory technical standards which will implement EMIR provisions. The paper outlines ESMA’s approach in determining: the characteristics of OTC derivative classes that should be subject to the clearing obligation; the date(s) from which the clearing obligation takes effect, including any phase-in and the categories of counterparties to which the obligation applies; and the minimum remaining maturity of the OTC derivative contracts referred to under EMIR. It also provides a high level analysis of the current readiness of derivative asset classes regarding the clearing obligation on the basis of some of the criteria that ESMA will take into account when defining the classes for central clearing. Responses to the paper are required by 12 September 2013. (12/07/13) http://www.esma.europa.eu/system/files/2013-925_discussion_paper_-_the_clearing_obligation_under_emir_0.pdf (NB: over 40 pages long)

EC: “Path forward” on derivatives

The EC and CFTC have announced a “path forward” regarding their joint understandings on a package of measures for how to approach cross-border derivatives. For bilateral uncleared swaps, and because EU and US rules for risk mitigation are essentially identical, CFTC plans to issue no-action relief for certain transaction-based requirements. In this regard, the EU’s system of equivalence can be applied to allow market participants to determine their own choice of rules. For the trading-execution requirement, CFTC plans to permit foreign boards of trade that have received direct access no-action relief to also list swap contracts for trading by direct access to avoid market and liquidity disruption. CFTC will extend appropriate time-limited transitional relief to certain EU-regulated MTFs, in the event that CFTC’s trade execution requirement is triggered before 15 March 2014. Such relief would be available for MTFs that have multilateral trading schemes, a sufficient level of pre- and post-trade price transparency, non-discriminatory access by market participants, and an appropriate level of oversight. CFTC staff will issue “no-action” letters to this effect. CFTC will consult with the EC in giving consideration to extending regulatory relief to trading platforms that are subject to requirements that achieve regulatory outcomes that are comparable to those achieved by the requirements for swap execution facilities. In January 2014, both parties will assess progress. With respect to CCPs, CFTC rules and EMIR are both based on international minimum standards. CCP initial margin coverage is the only key material difference and the parties will work together to reduce any regulatory arbitrage opportunities. They will also endeavour to ensure that CCPs that have not yet been recognised or registered in the US or the EU will be permitted to continue their business operations. Both sides aim to conclude these discussions as soon as possible, at which stage the substance of relevant relief awarded by CFTC will be reflected in its guidance relating to substituted compliance, as approved by its principals, while the EU equivalence decisions will have been in place, and where necessary, amended to reflect this partnership. (11/07/13) http://europa.eu/rapid/press-release_MEMO-13-682_en.htm?locale=en#PR_metaPressRelease_bottom

EC: CDS investigation

The EC has announced that it is sending a statement of objections to a number of investment banks (listed below) and to ISDA and Markit in what is described as a key step in its ongoing antitrust investigation into CDS, opened in April 2011. The banks involved are Bank of America Merrill Lynch, Barclays, Bear Stearns (now part of JP Morgan), BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, UBS and the Royal Bank of Scotland. The EC notes that it has reached the preliminary conclusion that these companies may have breached EU antitrust rules that prohibit anti-competitive agreements and that they may have coordinated their behaviour in order to jointly prevent exchanges from entering the CDS market between 2006 and 2009. (1/07/13)

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http://europa.eu/rapid/press-release_SPEECH-13-593_en.htm?locale=en http://europa.eu/rapid/press-release_IP-13-630_en.htm?locale=en

BIS: The non-internal model method for capitalising counterparty credit risk exposures// Capital treatment of bank exposures to central counterparties

BIS has published two consultation papers in relation to derivatives-related transactions under the capital adequacy framework. The first of these outlines a proposal to improve the methodology for assessing the counterparty credit risk associated with derivative transactions. The proposal would, when finalised, replace the capital framework's existing methods - the Current Exposure Method (CEM) and the Standardised Method. It improves on the risk sensitivity of the CEM by differentiating between margined and unmargined trades The second consultation sets out proposals for calculating regulatory capital for a bank's exposures to CCPs and is designed to replace an interim treatment for bank exposures to CCPs issued by the Basel Committee in July 2012. Responses are required by 27 September 2013 (28/06/13) http://www.bis.org/publ/bcbs254.pdf (NB: over 30 pages long) http://www.bis.org/publ/bcbs253.pdf

IOSCO: Principles for the regulation of exchange traded funds

IOSCO has published its final report which contains principles intended to guide the regulation of ETFs and foster industry best practices in relation to these products. including principles intended to clearly differentiate ETFs from other non-CIS exchange traded products. Other principles encourage the disclosure of related fees and expenses, including the eventual impact of securities lending on these, as well as disclosure to address the types of risks investors may be exposed to particularly through ETFs using complex strategies that may involve the use of leverage (or reverse leverage). The report addresses concerns tied to the structuring of ETFs, including the management of potential inherent conflicts of interest and of counterparty risks arising from the two main types of replication methods: physical and synthetic. IOSCO encourages regulators to consider imposing requirements to ensure that ETFs appropriately address risks raised by counterparty exposure and collateral management. (24/06/13) http://www.iosco.org/library/pubdocs/pdf/IOSCOPD414.pdf (NB; over 50 pages long)

BoE: Central counterparties: what are they, why do they matter and how does the Bank supervise them?

This article explains what CCPs are and sets out their importance to the financial system, including the benefits they bring and some of the risks they could present if not properly managed. It also summarises BoE’s approach to supervising CCPs and describes some of the key priorities BoE is pursuing. (10/06/13) http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2013/qb1302ccpsbs.pdf

ESMA: Guidelines and recommendations regarding written agreements between members of CCP colleges

The report contains guidelines and recommendations as envisaged in an Opinion issued by ESMA in March 2013 on draft regulatory technical standards on colleges for CCPs. National competent authorities must advise ESMA within two months of publication in all official languages as to whether they intend to comply or intend to comply with the guidelines and recommendations. (7/06/13) http://www.esma.europa.eu/system/files/2013-661_report_gr_on_college_written_agreement_-_final_for_publication_20130604.pdf

The Stamp Duty and Stamp Duty Reserve Tax (ICE Clear Europe Limited) Regulations 2013/1382

These Regulations give relief from stamp duty and stamp duty reserve tax to certain transfers of, or agreements to transfer, traded securities or options made in the course of trading in those traded securities or options either on a facility or over the counter. The transfers and agreements eligible for relief are those involving ICE Clear Europe Limited and its nominees, (through whom transactions on the facility are cleared) or clearing participants of ICE Clear Europe and its nominees. (Date in force: 1/07/13) (5/06/13) http://www.legislation.gov.uk/uksi/2013/1382/pdfs/uksi_20131382_en.pdf

EC: Proposal for a Regulation of the European Parliament and of the Council on improving securities settlement in the European Union and on central securities depositories (CSDs) and amending Directive 98/26/EC

A marked-up Presidency compromise document dated 19 April 2013, to be discussed at a meeting on 26 April, has been published. (3/06/13) http://register.consilium.europa.eu/pdf/en/13/st08/st08669.en13.pd f (NB: over 130 pages long)

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AIMA: Addressing overlaps between EMIR and CFTC OTC derivatives regulation

In this paper, AIMA sets outs its views on key rulemaking areas under EMIR and Dodd-Frank where further mitigation of conflicts would be helpful. It discusses the extra-territoriality of EMIR and CFTC requirements and rules; the potential for regulatory conflict or overlap and equivalence. An annex provides a comparison of requirements under CFTC rules and EMIR in tabular format. (29/05/13) http://www.aima.org/download.cfm/docid/64772F11-F066-414B-974E5CC984BEAE42

EC: Practical implementation of the EMIR framework to non-EU CCPs

EMIR introduces a new recognition procedure for central CCPs that are established outside the EU but wish to provide services to market participants that are established in the EU. The purpose of this memo, set out in a Q&A format, is to specify how this recognition procedure will be implemented. (17/05/13) http://ec.europa.eu/internal_market/financial-markets/docs/derivatives/130513_equivalence-procedure_en.pdf

ECB: Survey on credit terms and conditions in euro-denominate dsecurities financing and OTC derivatives markets

ECB has published a report on the results of a new qualitative survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets (SESFOD). This survey is part of an international initiative to enhance the monitoring of credit terms and conditions in these wholesale financial markets. (30/04/13) http://www.ecb.europa.eu/press/pr/date/2013/html/pr130430_1.en.html http://www.ecb.europa.eu/press/pr/date/2013/html/pr130430_1_results.en.pdf?31a19b2e7aada7ea789c034d34524a0a (NB: over 30 pages only)

EC: OTC derivatives regulators group

This is a report provided to the G20 finance ministers’ meeting of 18-20 April 2013. It is noted that four meetings have been held between principals of the authorities with responsibility for the regulation of the OTC derivatives markets in Australia, Brazil, the EU, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland and the US and goes on to outline details of progress and agreement reached on various specific matters, including scope of regulation for cross-border compliance; regulatory gaps and the provision of data between regulators. (26/04/13) http://ec.europa.eu/internal_market/financial-markets/docs/derivatives/130418_odrg-report-g20_en.pdf

BoE: Article by Paul Tucker: Central counterparties in evolving capital markets: safety, recovery and resolution/OTC derivatives

BoE has published the text of an article for the Banque de France Financial Stability Review. Paul Tucker focuses on resolution and concludes: “The reforms of global capital markets put clearing houses at centre stage. The system will not be resilient unless the CCPs themselves are safe and sound and capable of orderly resolution. Globally and in the European Union, steps are underway to deliver just that. They are vitally important. The reform programme cannot be, and is definitely not, just about banks”. A link to the entire paper on various other aspects of OTC derivatives appears below. This contains contributions from, among others, Mark Carney and Michel Barnier). (23/04/13) http://www.bankofengland.co.uk/financialstability/Documents/speech650.pdf http://www.bankofengland.co.uk/financialstability/Documents/tucker_fsr1304.pdf (NB: over 200 pages long)

HMT: Cross-border OTC derivatives regulation

HMT has published the text of a letter signed by finance ministers in a number of jurisdictions, including the UK, Germany, France and Russia, as well as Michel Barnier (EC) to the US Treasury secretary and copied to various US regulators and government committees. The letter raises concerns over the lack of progress in developing workable cross-border rules as part of reforms of the OTC derivatives market and sets out a number of draft attached core principles intended to avoid cross-border conflicts. (19/04/13) http://www.hm-treasury.gov.uk/d/letter_crossborder_otc_derivatives_reform_180413.pdf

BIS/IOSCO: Implementation of principles for financial market infrastructures

It has been announced that BIS and IOSCO have started the process of monitoring implementation of the principles (international standards for payment, clearing and settlement systems, including CCPs and trade repositories) which

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were originally issued in April 2012. A first assessment is currently underway examining whether jurisdictions have made regulatory changes that reflect the principles and responsibilities in the principles. Results of this assessment are due to be published in Q3 2013. (17/04/13) http://www.bis.org/cpss/cpssinfo2_5.htm

FSB: OTC derivatives market reforms

This is the fifth progress report by on OTC derivatives markets reform implementation which has been published just after the end-2012 deadline. It focuses on the status of international policy development, implementation of national and regional legislation and regulations and updates the assessment of progress in practical implementation measures to meet the G20 commitments relating to central clearing, exchange and electronic platform trading, reporting to trade repositories, capital requirements and standardisation. The report also highlights work needed to finalise implementation of the commitments. It is noted that, as implementation is still progressing after the end-2012 deadline, FSB’s OTC Derivatives Working Group will continue to monitor implementation of OTC derivatives reforms (16/04/13) http://www.financialstabilityboard.org/publications/r_130415.pdf (NB: over 100 pages long)

ESMA: Interview with Steven Maijoor on post-trade harmonisation and financial integration in Europe

ESMA has highlighted a video interview with Steven Majoor at the ECB/ECon conference held on 19 March 2013. (10/04/13) http://www.youtube.com/watch?v=_8xD8Yg70fI&list=PL347E929CBF4A76F7&index=12

PRA: Counterparty credit risk advanced model approaches: process for post approval changes

PRA has adopted a number of legacy FSA policy publications relevant to the advancement of its objectives. This document, initially issued by FSA, has been adopted by the PRA as a Supervisory Statement as part of this process and describes PRA’s approach for post-approval changes to counterparty credit risk internal model method (BIPRU 13.6.2) and master netting agreements internal model approaches (Repo VaR) (BIPRU 5.6.13) extensions of the scope of approval, and roll out of portfolios according to the roll-out plan; it suggests the documentation we would seek to support the proposed change and provides an overview of our response to these advised change. PRA may choose to review this legacy publication at a later stage. (5/04/13) http://www.bankofengland.co.uk/publications/Documents/other/pra/policy/2013/counterpartycreditrisklss3-13.pdf

EC: ISDA

The EC has extended the scope of an investigation into credit default swaps, which commenced in April 2011, to include ISDA. The EC's inquiry found preliminary indications that ISDA may have been involved in a coordinated effort of investment banks to delay or prevent exchanges from entering the credit derivatives business. The EC is examining whether a number of investment banks may have used Markit to foreclose the development of certain CDS trading platforms which it says could have been achieved through collusion or an abuse of a possible collective dominance. It is emphasised that the opening of an investigation does not prejudge its outcome. (26/03/13) http://europa.eu/rapid/press-release_IP-13-286_en.htm

ESMA: Practical guidance for the recognition of third country CCPs by ESMA

This notes provides information on the recognition by ESMA of Third Country CCPs (TC-CCPs) under Chapter 4 of Title III of Regulation (EU) No 648/2012 (EMIR) and Chapter II of Commission Delegated Regulation (EU) No 153/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 with regard to regulatory technical standards on requirements for central counterparties It does not address issues related to a substantive examination of whether the conditions for recognition are met for individual TC-CCPs. (13/03/13) http://www.esma.europa.eu/system/files/tc-ccp_applications.pdf

BIS: Information flows in dark markets: dissecting customer currency trades

This BIS working paper considers order-flows of different customer segments in the foreign exchange market. Among the conclusions: “asset managers, for instance, tend to be trend-followers, whereas individual investors behave as contrarians. Hedge funds (on aggregate) do not seem to fall in any of these two categories”. (7/03/13) http://www.bis.org/publ/work405.pdf (NB: over 70 pages long)

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FSA: FG13/03: The use of the group exclusion and the CREST regulated activity

In the “Dear CEO” letter (second link below) FSA notes that it has come to its attention that some CREST sponsor firms might have misread Article 69(7), (the “Group exemption”) of the RAO. The accompanying guidance clarifies under which arrangements a firm can reasonably rely on the Group exemption. The guidance is effective from 5 March 2013. (5/03/13) http://www.fsa.gov.uk/static/pubs/guidance/fg13-03-summary.pdf http://www.fsa.gov.uk/static/pubs/guidance/fg13-03.pdf

BoE: Proposed statutory statements of policy in respect of the Bank of England’s supervision of financial market infrastructures

BoE is required by FSMA to publish statements of policy relating to its powers over ‘qualifying parent undertakings’ of UK RCHs, and its use of penalties. This consultation paper sets out the Bank’s intended approach to these matters. Responses are required by 21 March 2013. (1/03/13) http://www.bankofengland.co.uk/financialstability/Documents/role/risk_reduction/payment_systems_oversight/pdf/finalcpsupervisionoffmis.pdf

BoE: Proposed rules for recognised clearing houses and approved operators

This consultation paper seeks comments on five rules that BoE proposes to make for RCHs under FSMA and persons approved to operate a system for dematerialised settlement under the Uncertificated Securities Regulations (The proposed RCH rules set out here would be made using BoE’s new powers under FSMA. As a result, the relevant procedural requirements are those set out in s138J FSMA. Responses are required by 21 March 2013. (1/03/13) http://www.bankofengland.co.uk/financialstability/Documents/role/risk_reduction/payment_systems_oversight/pdf/cpforclearingandoperatorsweb.PDF

EC: Commission Delegated Regulation (EU) No 148/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards on the minimum details of the data to be reported to trade repositories/ Commission Delegated Regulation (EU) No 149/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, and risk mitigation techniques for OTC derivatives contracts not cleared by a CCP/ Commission Delegated Regulation (EU) No 150/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards specifying the details of the application for registration as a trade repository/ Commission Delegated Regulation (EU) No 151/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories, with regard to regulatory technical standards specifying the data to be published and made available by trade repositories and operational standards for aggregating, comparing and accessing the data/ Commission Delegated Regulation (EU) No 152/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on capital requirements for central counterparties/ Commission Delegated Regulation (EU) No 153/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on requirements for central counterparties

These have now been published in the Official Journal. (25/02/13) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:052:0001:0010:EN:PDF http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:052:0011:0024:EN:PDF http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:052:0025:0032:EN:PDF http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:052:0033:0036:EN:PDF http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:052:0037:0040:EN:PDF http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:052:0041:0074:EN:PDF

EC: Commission Delegated Regulation (EU) No 148/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards on the minimum details of the data to be reported to trade repositories

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This has now been published in the Official Journal. (20/02/13) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:052:0001:0010:EN:PDF

BIS/IOSCO: Margin requirements for non-centrally cleared derivatives

This consultation represents a near-final proposal on margin requirements for non-centrally-cleared derivatives. This document presents the near-final policy framework that establishes minimum standards for margin requirements for non-centrally cleared derivatives and reflects the near-final policy framework after consideration of the responses to the first consultative document issued in July 2012 as well as the results of a quantitative impact. This consultative document seeks comment on four questions on certain specific aspects of the near-final margin framework: the treatment of physically-settled FX forwards and swaps under the framework, .the ability to engage in limited re-hypothecation of collected initial margin, .the proposed phase-in framework, and .the adequacy of the conducted quantitative impact study. Responses are required by 15 March 2013. (18/02/13) http://www.bis.org/publ/bcbs242.pdf (NB: over 40 pages long)

ESMA: Consultation on guidelines for establishing consistent, efficient and effective assessments of interoperability arrangements

ESMA has now published the responses to this consultation which are available to download individually via the following link. (7/02/13) http://esma.europa.eu/consultation/Consultation-Guidelines-establishing-consistent-efficient-and-effective-assessments-int

FSA: Statement on Basel III rules on capital requirements for exposures to CCPs

FSA reports that, in July 2012, BIS agreed a revised regulatory rules text on the capital requirements for bank exposures to central counterparties. FAQs published at the end of 2012 clarified that during 2013, if a CCP regulator has not yet implemented the CPSS-IOSCO Principles for Financial Market Infrastructures (but has publicly stated that it is working towards implementing these principles, the CCPs that are regulated by the CCP regulator may be treated as qualifying CCPs. However, a CCP regulator may still declare a specific CCP non-qualifying.' FSA notes that it is working towards implementation and reserves the right to declare a specific CCP to be non-qualifying. However, currently all recognised clearing houses based in the UK and prudentially supervised by FSA may be treated as qualifying CCPs for a transitional period that, unless extended, expires on 31 December 2013. It is further noted that FSA’s supervision is currently focused on preparing domestic CCPs to meet the requirements of EMIR, and it is anticipated that UK CCPs will apply for authorisation under EMIR during 2013. From 1 April 2013, responsibility for the supervision of CCPs will pass to EoE. (25/01/13) http://www.fsa.gov.uk/portal/site/fsa/menuitem.10673aa85f4624c78853e132e11c01ca/?vgnextoid=24445ec45227c310VgnVCM2000004fbc10acRCRD&vgnextchannel=de5a7a662c93c310VgnVCM2000004fbc10acRCRD&vgnextfmt=default

BoE: Remarks to the London Money Market Association executive committee meeting

BoE has published a synopsis of the above, in which Chris Salmon of BoE provides a progress report on some of the key changes BoE has been promoting in the payment, settlement and clearing infrastructure for the unsecured and secured money markets. He also offers some comments on the offshore RMB market in London. (25/01/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/023.aspx

BoE: Joint initiative to introduce a cleared term delivery-by-value service

BoE reports that Euroclear UK & Ireland Ltd and LCH.Clearnet Ltd (together with LMMA and gilt repo market participants, are working on a joint initiative to introduce and adopt a new service to centrally clear and settle sterling general collateral repo trades on a term basis. The aim is to introduce the new service in late 2013/early 2014. The new service will be based on LCH.Clearnet’s existing RepoClear Sterling GC product but will settle at Euroclear using its term delivery-by-value product and will align settlement with the underlying maturity of general collateral transactions. BoE’s Money Market Liaison has established a sub-group to oversee the joint initiative, which will comprise representatives from all above-mentioned parties. It will consider technical development and delivery of the service by EUI and LCH.Clearnet to the specification agreed with market participants; revising the Gilt Repo Code to cover the change to market practice; and agreeing the approach to migration to, and adoption of, the new service. The group’s first meeting will take place on 30 January 2013 and minutes will appear in due course on BoE’s website. (24/01/13) http://www.bankofengland.co.uk/publications/Pages/news/2013/022.aspx

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FSA: High-frequency trading and the execution costs of institutional investors

FSA has published this study in its series of “occasional reports” (which, it is emphasised, expresses the views of the authors rather than FSA). It considers whether high-frequency trading increases the execution costs of institutional investors. It concludes that there is no evidence that increases in HFT activity impacted institutional execution costs. (9/01/13) http://www.fsa.gov.uk/static/pubs/occpapers/op43.pdf (NB: over 40 pages long)

Getting the third pillar to work – active investors and listed company regulation FCA: Speech by Marc Teasdale: Consumer protection in the listing regime (21 March 2014)

FCA has published the text of this speech, given at the Securities Regulation in Europe (Thirteenth Annual), Practising Law Institute. He discusses FCA’s preliminary work on its LR proposals, including some of the issues it encountered and how FCA would describe its consumer protection objective when operating as a primary markets regulator. (26/03/14) http://www.fca.org.uk/news/consumer-protection-listing-regime

ESMA: Consultation paper on draft regulatory technical standards on major shareholdings and indicative list of financial instruments subject to notification requirements under the revised Transparency Directive

ESMA has published this consultation which addresses: the method of calculation of 5% threshold exemption regarding trading books and market makers; the calculation method regarding a basket of shares or an index; methods for determining the ‘delta’ for calculating voting rights; and exemptions regarding notification of financial instruments. It also sets out the proposed content of an indicative list of financial instruments which should be subject to the notification requirements laid down in the Transparency Directive, and outlines the processes for updating the indicative list. Responses are required by 30 May 2014. (21/03/14) http://www.esma.europa.eu/system/files/2014-302_esma_consults_on_major_shareholders_disclosures_0.pdf http://www.esma.europa.eu/system/files/2014-300_consultation_paper_on_draft_rts_on_major_shareholdings.pdf

EC: Commission Delegated Regulation (EU) No …/.. of 7.3.2014 supplementing Directive 2003/71/EC of the European Parliament and of the Council with regard to regulatory technical standards for publication of supplements to the prospectus

This draft and explanatory memorandum has been published . (11/03/14) http://ec.europa.eu/transparency/regdoc/rep/3/2014/EN/3-2014-1392-EN-F1-1.Pdf

ESMA: Guidelines on alternative performance measures

ESMA has published a consultation in relation to these guidelines, which are intended to encourage European issuers to publish transparent, unbiased and comparable information on their financial performance in order to provide users with a better understanding of their performance. The proposed guidelines set out the principles that issuers must follow when presenting alternative performance measures, and are based on the requirements applicable to financial statements, as required by the IAS Regulation. It is noted that the guidelines would apply to issuers with securities traded on regulated markets and all competent authorities and other bodies in the EU that undertake enforcement activities under the Transparency Directive. Responses are required by 14 May 2014. ESMA expects to publish the final guidelines in Q4 2014. (13/02/14) http://www.esma.europa.eu/system/files/2014-174_esma_consults_on_guidelines_on_alternative_performance_measures_13.02.2014.pdf http://www.esma.europa.eu/system/files/2014-175_cp_on_the_draft_guidelines_on_apms.pdf

FCA: PS14/2 - Incoming statutory regime for primary information providers – including feedback on CP13/8 and final rules

This PS reports on the main issues arising from CP 13/8 and publishes the final rules. The new statutory regime for PIPs will be effective on 31 January 2014. Existing regulated information services who wish to become approved as a PIP will not be grandfathered, but will benefit from a six month transitional period during which they may continue to act as an RIS while applying for approval. Existing regulated information services that have not had their application approved by the end of the six month transitional period will no longer be able to disseminate regulated information in the UK on behalf of UK issuers. (31/01/14) http://www.fca.org.uk/static/documents/policy-statements/ps14-02.pdf

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FCA: CP14/2**: Proposed amendments to the Listing Rules in relation to sponsor competence and other amendments to the Listing Rules and Prospectus Rules

In this CP, FCA sets out proposals to amend LR and guidance on sponsor competence. It also seeks views on the use of joint sponsors, removing an LR requirement for a premium listed issuer to have to prepare a 28-day circular, and •creating new PR making it clear that an applicant is responsible for submitting a compliant and factually accurate prospectus. Responses are required by 30 April 2014. FCA intends to publish feedback and final rules in Q4 2014. (30/01/14) http://www.fca.org.uk/news/new-rules-proposed-for-sponsors-to-enhance-listing-regime http://www.fca.org.uk/static/documents/consultation-papers/cp14-02.pdf

ESMA: Q&A on the Prospectus Directive updated

ESMA has updated its Q&A document on the Prospectus Directive with two new questions and answers. (15/01/14) http://www.esma.europa.eu/content/QA-Prospectus-21st-version

ESMA: Format of the base prospectus and consistent application of Article 26(4) of the Prospectus Regulation

ESMA has published an opinion which states that: the base prospectus shall not be drawn up as a tripartite prospectus (on legal grounds) and any incorporation by reference of relevant information should comply with the conditions set out in the Prospectus Regulation. (20/12/13) http://www.esma.europa.eu/system/files/2013-1944_opinion_on_tripartite_base_prospectuses.pdf

FCA: PS13/11: Consequential changes to the Listing Rules resulting from the BIS Directors’ Remuneration Reporting Regulations and Narrative Reporting Regulations including feedback on CP13/7 and final rules

FCA has published this PS, noting that almost all of the respondents to the CP were extremely supportive of the proposals, but raised concerns over the proposed implementation date. As a result, FCA has amended the proposals so that the new rules will be effective on 13 December 2013 for listed companies with a financial year ending on or after 30 September 2013 that have not published their annual financial report on or before 13 December 2013. Companies already preparing their annual financial report in compliance with the existing LR and Regulations can continue to publish that report after 13 December 2013 in compliance with both sets of requirements, if they choose to do so. To avoid doubt, the new LR will not apply to a premium listed company with a financial year ending before 30 September 2013.. (13/12/13) http://www.fca.org.uk/static/documents/policy-statements/ps13-11.pdf

HMT: Autumn Statement 2013

Policy decisions relevant include the following:

Quarterly reporting requirements – The Government will introduce an element of the Transparency Directive in advance of the November 2015 deadline for implementation, to remove the requirement for listed companies to publish quarterly reports and plans to bring forward enabling secondary legislation early in 2014, allowing FCA to implement this change following a consultation.

Taxation of corporate debt and derivative contracts – the Government will introduce legislation to enhance existing anti-avoidance provisions to prevent abuse of bond fund. Legislation will also be introduced to clarify and rationalise the taxation of corporate partners where loan relationships and derivative contracts are held by a partnership.

ETFs - from April 2014 the government will remove the stamp duty and SDRT charge on purchases of shares in ETFs that would currently apply if an ETF were domiciled in the UK.

Retail participation in capital markets: increasing retail bonds for ISAs – the Government is considering whether to increase the number of retail bonds eligible for stocks and shares ISAs by reducing the requirement that such securities must have a remaining maturity above five years.

Retail participation in capital markets: public equity markets – the Government is to publish a discussion paper on enhancing equity financing in the UK, including options to improve access to public equity markets for UK businesses and retail investors. (5/12/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263575/Autumn_Statement_2013.pdf

ESMA: Review of Accounting Practices

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ESMA) has published a review of the comparability and quality of disclosures in 2012 IFRS financial statements of listed financial institutions. It makes recommendations aimed at enhancing the transparency of financial statements through the improvement of disclosures in certain key areas including: credit risk and impact of forbearance practices; liquidity and funding risk; asset encumbrance and fair value measurement of financial instruments. (18/11/13) http://www.esma.europa.eu/system/files/2013-1664_report_on_comparability_of_ifrs_financial_statements_of_financial_institutions_in_europe.pdf

ESMA: Information on shareholder cooperation and acting in concert under the Takeover Bids Directive

ESMA has published a statement on practices governed by the Takeover Bid Directive, focused on shareholder cooperation issues relating to acting in concert and the appointment of board members. The statement contains a “White List” of activities that shareholders can cooperate on without the presumption of acting in concert. The statement also contains information on how shareholders may cooperate in order to secure board member appointments by setting out factors that national authorities may take into account when considering whether shareholders are acting in concert. (12/11/13) http://www.esma.europa.eu/system/files/2013-1645_esma_clarifies_shareholder_cooperation_in_takeover_situations.pdf http://www.esma.europa.eu/system/files/2013-1643_cover_note_on_public_statement_on_shareholder_cooperation_and_acting_in_concert_under_the_takeover_bids_directive.pdf http://www.esma.europa.eu/system/files/2013-1642_esma_public_statement_-_information_on_shareholder_cooperation_and_acting_in_concert_under_the_takeover_bids_directive.pdf

ESMA: European common enforcement priorities for 2013 financial statements

ESMA has published this document, noting that the priorities are to be used by EEA national authorities in their assessment of listed companies’ 2013 financial statements. ESMA has defined these priorities in order to promote the consistent application of IFRS across the EEA. Priorities identified refer to the application of IFRS in relation to: impairment of non-financial assets; measurement and disclosure of post-employment benefit obligations; fair value measurement and disclosure; disclosures related to significant accounting policies, judgements and estimates; and measurement of financial instruments and disclosure of related risks. ESMA intends to collect data on how European listed entities have applied the priorities and will publish its findings in early 2015. It expects to publish its findings on the 2012 priorities in early 2014. (11/11/13) http://www.esma.europa.eu/system/files/2013-1634_esma_public_statement_-_european_common_enforcement_priorities_for_2013_financial_statements.pdf

FCA: CP13/15: Feedback on CP12/25: Enhancing the effectiveness of the Listing Regime and further consultation

FCA has published a package of measures intended to enhance the protections for minority shareholders in premium listed companies where they are at risk of being abused by controlling shareholders. It follows on from CP12/25 Enhancing the effectiveness of the Listing Regime, which was published by FCA in 2012, which set out proposals to enhance the effectiveness of the Listing Regime. Responses are required by 5 February 2014. Depending on the results of the consultation, FCA intends to implement the full and final package of measures in mid-2014. (6/11/13) http://www.fca.org.uk/static/documents/consultation-papers/cp13-15.pdf

EC: Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013, amending Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and Commission Directive 2007/14/EC laying down detailed rules for the implementation of certain provisions of Directive 2004/109/EC

This has been published in the Official Journal. (6/11/13) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:294:0013:0027:EN:PDF

ESMA: Prospectuses Q&A

This updated Q&A provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of the Prospective Directive. New items are marked in red. (28/1913) http://www.esma.europa.eu/system/files/2013-1537_qa_prospectuses_-_20th_updated_version.pdf (NB: over 50 pages long)

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EC: Transparency Directive

The Council has adopted the revised Transparency Directive (text dated 10 October 2013 appears in the second link below). (17/10/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/139037.pdf http://register.consilium.europa.eu/pdf/en/13/pe00/pe00037.en13.pdf (NB: over 50 pages long)

FCA: FG13/9 - Primary Market Bulletin No. 7

Further to the February 2013 consultation on Primary Market Bulletin No 5, the UKLA Knowledge Base has been updated with the guidance set out in Primary Market Bulletin No. 7. Having now considered the comments received on notes published for consultation in Primary Market Bulletins 5 and 6, FCA is publishing one new note and two amended notes in the Knowledge Base (UKLA/TN/631.1 - Zero coupon notes; UKLA/TN/605.2 - Supplementary prospectus; UKLA/TN/629.2 - Final terms). The key amendments to the notes can be found in the second link below. (9/10/13) http://www.fca.org.uk/static/documents/ukla/primary-market-bulletin-7.pdf http://www.fca.org.uk/static/documents/ukla/pmb-7-blackline-changes.pdf

FCA: CP13/7*: Consequential changes to the Listing Rules resulting from the BIS Directors’ Remuneration Reporting Regulations and Narrative Reporting Regulations

This CP sets out proposals with regard to the above. Following analysis of the new BIS requirements, FCA proposes removing directors’ remuneration type rules where the new BIS Directors’ Remuneration Reporting Regulations produce a substantially similar outcome Specifically, it proposes the removal of LR 9.8.8R (with the exception of LR9.8.8R (9)), LR 9.8.11R and LR 9.8.12R). Updates to LR 9.8.13R are also proposed. It is noted that FCA is proposing to remove listing rules applicable only to premium listed companies incorporated in the UK that fall within the scope of the new BIS Directors’ Remuneration Reporting Regulations. No premium listed overseas incorporated companies will be affected. Responses are required by 9 October 2013 and FCA intends to publish feedback later in the year. (28/08/13) http://www.fca.org.uk/static/documents/consultation-papers/cp13-07.pdf (NB: over 40 pages long)

FCA: CP13/8*: Arrangements for the disclosure of regulated information

This CP contains feedback on the following: chapter 4 of FSA CP12/37, which outlined the proposed new regulatory regime for Primary Information Providers (PIPs) chapter 3 of FSA CP13/5, which outlined proposed fees for PIPs, and chapter 2 of FSA CP13/6, which proposed changes to EG regarding PIPs. Further to Appendix 3 of CP12/37, regarding the definition of a Regulatory Information Service (RIS) FCA is now consulting further on that issue. Responses are required by 28 October 2013. Subject to responses, FCA intends to make the rules in time for them to come into effect early in 2014. (28/08/13) http://www.fca.org.uk/static/documents/consultation-papers/cp13-08.pdf (NB: over 50 pages long)

FCA: FG13/4 - Primary Market Bulletin No. 2 and Primary Market Bulletin No. 5/ GC13/4 Primary Market Bulletin No. 6

Further to consultations in July 2012 and February 2013, the UKLA Knowledge Base has been updated with the guidance set out in Primary Market Bulletin No. 6. Amongst other matters, new notes have been published on block listings; periodic financial information and inside information; sponsor services and sponsor notification requirements and existing notes in relation to eligibility review process, review and approval of documents and risk factors have been updated. In addition, FCA is now consulting on Primary Market Bulletin No 6 which proposes a new note on dealing with FCA in an open and co-operative manner and revising the note on reverse takeovers. Responses are required by 10 September 2013. (30/07/13) http://www.fca.org.uk/news/fg13-04-primary-market-bulletin-no-2-and-primary-market-bulletin-no-5 http://www.fca.org.uk/news/guidance-consultations/gc13-04 http://www.fca.org.uk/static/documents/ukla/primary-market-bulletin-6.pdf

BIS/BERR: Transparency & trust enhancing the transparency of UK company ownership and increasing trust in UK business

This discussion paper invites views on a number of proposals intended to enhance the transparency of UK company ownership and increase trust in UK business. It is proposed that a central registry of company beneficial ownership information be established which would hold information on the beneficial owners of all UK companies, but will consider whether companies already subject to stringent disclosure rules should be exempt. All companies would be given statutory tools to identify their beneficial ownership and additional requirements which might be required to ensure beneficial ownership information on all companies is indeed obtained is considered in the paper. The paper looks at: what information should be provided to the registry; how frequently it should be updated; how to ensure that it is as accurate as possible and whether information in the registry should be made public. It is proposed that the creation of

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new bearer shares should be prohibited; and that existing bearer shares should be converted to ordinary registered shares. The paper looks at options to enhance transparency around the use of nominee directors; and whether companies should be prohibited from being appointed company directors. Further to recommendations in the Parliamentary Commission on Banking Standards’ report, the paper considers whether to amend directors’ statutory duties in key sectors such as banking and whether to allow sectoral regulators to disqualify directors in their sector. It considers what additional factors the court might take into account in director disqualification proceedings, such as the nature and number of previous company failures a director has been involved in; options to help creditors receive compensation when they have suffered from a director’s fraudulent or reckless behaviour; proposals on extending the time limit for bringing disqualification proceedings in insolvent company cases; suggests that directors who have been disqualified be offered education or training to equip them with the skills they need to go on to run a successful company and whether individuals subject to foreign restrictions should be prevented from being a director of a UK company; and whether directors convicted of a criminal offence in relation to the management of an overseas company should be able to be disqualified in the UK. Reponses are required by 16 September 2013. (15/07/13) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/212079/bis-13-959-transparency-and-trust-enhancing-the-transparency-of-uk-company-ownership-and-increaing-trust-in-uk-business.pdf (NB: over 80 pages long)

ABI: Encouraging equity investment: facilitation of efficient equity capital raising in the UK market

The report investigates the role and importance of the UK public equity markets, particularly with regard to the functioning of the IPO market and secondary capital raising for companies listed in the UK and how ABI believes it can be improved. (11/07/13) https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/Migrated/Investment%20and%20corporate%20governance/ABI%20Encouraging%20Equity%20Investment%20report.ashx (NB: over 40 pages long)

IMA: Adherence to the FCA’s Stewardship Code

IMA has published its third report on adherence to the Stewardship Code by asset owners, asset managers and service providers. It is noted that strategy and objectives, together with board remuneration, were the most frequently addressed issues, with collective engagement between institutional investors continuing to help meet aligned objectives. Among the key findings: there was an increase in monitoring with 76% of the 2012 respondents monitoring all investee companies as part of their investment process, compared to 70% in 2011’ thee was an increase in resource as the overall headcount of those involved with stewardship continues to rise; voting levels increased in all markets in 2012 and a slightly greater proportion of respondents voting all their UK shares and no respondents in 2012 followed service providers’ recommendations without giving due consideration themselves as to how they voted (this compares to 2011, where 4% of respondents stated they always followed such recommendations). (25/06/13) http://www.investmentuk.org/assets/files/surveys/20130612-stewardshipcode.pdf (NB: 70 pages long)

FCA: Speech by David Lawton: Investor relations in an increasingly regulated and international world (18 June 2013)

Text of the above, given at the Investor Relations Society Annual Conference, follows. He discusses key issues in the regulatory world for investor relations (the UK’s new regulatory structure; FCA’s objectives and approach, particularly with regard to UKLA and wholesale conduct; observations on the international landscape). He also considers FCA’s work on corporate access. He notes: “Reports of investment banks charging asset managers several thousand pounds an hour to meet with CEOs of their investee companies suggests that some of the current practices could be pushing out the sort of long-term investors needed for good stewardship in favour of those willing to stump up the cash. No one comes out well in these kind of stories. We need to have a conversation about how industry can yield better the benefits of corporate access and improve practices so that corporate access supports long-term stewardship … Data shows that the corporate access costs of the asset management sector are not going down. The most recent Thomson Reuters Extel survey shows that a quarter of what asset managers reward the sellside for is corporate access. Our recent supervisory work has highlighted to us that this an area where firms can do more work to manage their conflict of interest. There is also scope for firms to provide investors with more assurance that they exercise the same degree of oversight of expenses paid by the fund as they would if they paid for the same services themselves. This is an area where we believe greater transparency over cost would be of advantage to clients. We will have a full and open discussion with industry to reach the right outcome for investors and help build further trust in the sector”. (19/06/13) http://www.fca.org.uk/news/speeches/investor-relations-increasingly-regulated-international-world

ESMA: Data on prospectuses approved and passported

ESMA has published the above, which covers prospectuses for the period January-December 2012. (14/06/13) http://www.esma.europa.eu/system/files/esma-2013-741_report_prospectuses.pdf

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ESMA: Comparison of liability regimes in Member States in relation to the Prospectus Directive

ESMA has published what it describes as the first report of its kind, which provides a comparison of liability regimes covering the EEA and is aimed at providing clarity for market participants about the different regimes in place. The report contains an overview of the different arrangements and frameworks in place in EEA States to address administrative, criminal, civil and governmental liability, and provides clarity to market participants about the different regimes in place. The report does not cover how the regimes, or sanctions, are applied. Annexes contain full responses from EEA states. (10/06/13) http://www.esma.europa.eu/system/files/2013-619_report_liability_regimes_under_the_prospectus_directive_published_on_website.pd f (NB: over 40 pages long) http://www.esma.europa.eu/content/Comparison-liability-regimes-Member-States-relation-Prospectus-Directive

IOSCO: Investor gateway

IOSCO has launched this new online tool which aims to enhance the sharing of investor education information among IOSCO members and the public. The information contains online investor education materials from many of IOSCO´s members, as well as published IOSCO reports and presentations regarding investor education. (4/06/13) http://www.iosco.org/investor_education/

FCA: Statement on FSA CP12/25: Enhancing the effectiveness of the Listing Regime

FCA reports that, although it had originally intended to provide a PS on this in the spring, it now expects to be able to do so “later in the summer”. It is noted that FSA/FCA received a large number of responses, and it has been continuing to discuss a range of proposals with stakeholders. (31/05/13) http://www.fca.org.uk/news/firms/statement-on-cp-12-25

European Council/European Parliament/EC: Council confirms agreement with European Parliament on the Transparency Directive

A compromise has been reached with the European Parliament on updated transparency requirements for issuers of securities on regulated markets. The presidency will now confirm to the Parliament that the Council can agree to the compromise, enabling the Directive, amending an existing directive, to be adopted at first reading. Agreement was reached at a "trilogue" meeting with the Parliament and the Commission on 14 May 2013. The revised Directive will mean that listed companies, including small and medium-sized issuers, will no longer be obliged to publish quarterly financial information and investors will be prevented from secretly building up a controlling stake in a listed company The new text also includes a requirement for listed companies operating in the oil, gas and mineral extractive as well as the forestry industries, to disclose payments to governments in countries where they operate. (30/05/13) http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137336.pdf http://www.europarl.europa.eu/pdfs/news/expert/infopress/20130529IPR10728/20130529IPR10728_en.pdf http://europa.eu/rapid/press-release_MEMO-13-483_en.htm?locale=en

ESMA: Prospectuses

ESMA has published a revised Q&A document – new items are indicated in red. (28/05/13) http://www.esma.europa.eu/system/files/2013-594_19th_version_qa_document_prospectus_related_issues_may_2013.pdf (NB: over 60 pages long)

ESMA: Data on prospectuses approved and passported – January 2012 to June 2012

ESMA has published an amended version of the above (originally published in September 2012). It has been amended following the discovery of factual errors in the statistical information in section III. (16/05/13) http://www.esma.europa.eu/system/files/2012-603_esma_data_on_prospectuses_approved_and_passported_-_january_2012_to_june_2012_updated_15_may_2013.pdf

The Prospectus Regulations 2013/1125

These Regulations amend provisions of FSMA to implement one element of Directive 2010/73/EU (OJ L 327, 11.12.2010, p1) of the European Parliament and of the Council. These Regulations make one supplementary amendment Regulation 2 amends the exemption, introduced by section 86(1)(f) of the Act, to the obligation to produce

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a prospectus. (Date in force: 31/05/13) (14/05/13) http://www.legislation.gov.uk/uksi/2013/1125/pdfs/uksi_20131125_en.pdf

Commission Delegated Regulation (EU) No …/.. of 30.4.2013 amending Regulation (EC) No 809/2004 as regards the disclosure requirements for convertible and exchangeable debt securities

This draft Delegated Regulation seeks to increase legal clarity concerning the prospectus disclosure requirements for convertible or exchangeable debt securities, in particular concerning the disclosure regime applicable to the issuer of the underlying shares or to the underlying shares themselves. It also expands the application of disclosure requirements concerning the statements on working capital and capitalization and indebtedness to convertible or exchangeable debt securities provided that they correspond to equity securities, pursuant to Article 2(1)(b) of Directive 2003/71/EC, and their underlying shares are not admitted to trading on a regulated market. (13/05/13) http://ec.europa.eu/internal_market/securities/docs/prospectus/20130430-deleg-regulation_en.pdf

ESMA: Opinion: Framework for the assessment of third country prospectuses under Article 20 of the Prospectus Directive

The opinion explains a framework for third country share prospectuses under Article 20 and sets out the role of the EU Member States’ competent authorities in scrutinising prospectuses under these arrangements. ESMA has a;so decided to reissue CESR’s recommendations for the consistent implementation of the European Commission’s Regulation on Prospectuses nº 809/2004 (CESR/05-054b) published in January 2005 with an update of paragraphs 131-133 of the recommendations included in the previous document published in January 2005, and the inclusion of annexes I, II and III (second link below). The recommendations have not, however, been adopted as recommendations under Article 16 of the ESMA Regulation and therefore the ‘comply or explain’ mechanism established under that Article does not apply. (20/03/13) http://www.esma.europa.eu/system/files/2013-317.pdf http://www.esma.europa.eu/system/files/2013-319.pdf (NB: 50 pages long)

ESMA: Draft regulatory technical standards on specific situations that require the publication of a supplement to the prospectus

The paper sets out a draft regulatory technical standard concerning situations that require the systematic publication of a supplement to the prospectus which ESMA is obliged to develop in accordance with Article 16(3) of the Prospectus Directive. The listed situations are concrete examples of the general obligation in Article 16(1) to mention in a supplement every significant new factor, material mistake or inaccuracy relating to information included in the prospectus which is capable of affecting the assessment of the securities. ESMA believes that the test whether a new factor, mistake or inaccuracy qualifies as a triggering event for producing a supplement is the same test as whether information should be included in the prospectus. As a consequence, significance or materiality should be assessed according to the same qualitative and/or quantitative criteria used when drafting the prospectus. In light of this, ESMA has identified a short list of 10 situations, which will always require issuers, offerors or persons asking for admission to trading to draw up and publish a supplement to the prospectus. The paper includes a draft regulatory technical standard setting out the situations that would require a systematic publication of a supplement as well as the minimum content of such a supplement. Responses are required by 14 June 2013. (18/03/13) http://www.esma.europa.eu/system/files/2013-316.pdf (NB: 50 pages long)

FSA: Primary Market Bulletin Issue 5

The bulletin presents new technical and procedural guidance for inclusion in the UKLA Knowledge Base (and is inviting comments on the proposed guidance to be received by 8 April 2013) as well as some general informational updates from UKLA.(25/02/13) http://www.fsa.gov.uk/static/pubs/ukla/ukla-bulletin-no5.pdf http://www.fsa.gov.uk/library/policy/guidance_consultations/2013/13-02.shtml

ESMA: Final report: feedback statement on the consultation regarding the role of the proxy advisory industry

The report contains an analysis of the responses received to ESMA’s March 2012 consultation and sets out the next steps for ESMA and the industry. ESMA found hat there is no current market failure related to proxy advisors interaction with investors and issuers in the EU, which would require regulatory intervention. However, it has identified a number of concerns regarding the independence of proxy advisors, and the accuracy and reliability of the advice provided which would benefit from improved clarity and understanding amongst stakeholders. ESMA is recommending that the proxy advising industry should develop an EU Code of Conduct that focuses on: identifying, disclosing and managing conflicts of interest; and fostering transparency to ensure the accuracy and reliability of the advice. ESMA notes that it has had

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initial discussions with a number of industry participants and expects to begin work in the next few weeks. (19/02/13) http://www.esma.europa.eu/system/files/2013-84.pdf (NB: over 30 pages long)

EC: Application of Directive 2007/44/EC amending Council Directive 92/49/EEC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector

This report concludes that the review of the application of the Qualifying Holdings Directive shows that, overall, the regime created by the Directive is working satisfactorily, but suggests that shortcomings in the application of the Directive could be addressed by asking ESAs to update and clarify the 3L3 guidelines. It is noted that the EC is to work with competent national authorities and ESMA with a view to developing guidance to clarify the rules on acting in concert, notably in the context of the rules applicable to takeover bids. The EC will also consider ways to incorporate financial stability aspects more explicitly in the assessment process. Member States, the European Parliament, the European Economic and Social Committee and other interested parties are invited to respond to this report by 31 March 2013. The EC will advise by the end of 2013 if the regime for the assessment of qualifying holdings needs to be reinforced. (11/02/13) http://ec.europa.eu/internal_market/finances/docs/committees/130211_report_en.pdf

ESMA: ESMA’s technical advice on possible delegated acts concerning the Prospectus Directive as amended by the Directive 2010/73/EU

This technical advice sets out ESMA’s proposals for clarifications of and amendments to the Prospectus Regulation in order to increase legal clarity and propose application of the proportionate disclosure regime for convertible/exchangeable debt securities. ESMA expects to submit its final report to the EC in Q2 2013. (10/01/13) http://www.esma.europa.eu/system/files/2012-864.pdf (NB: over 70 pages long)

Archived material on the sector is available via the following links: January-June 2009, July-December 2009, January-December 2010, January-December 2011 and January-December 2012.

Updated 27/03/14

Regzone materials are intended for clients and professional contacts of CMS Cameron McKenna LLP. They are intended to simplify and summarise the issues covered and must not be relied upon as giving definitive advice.

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