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Article (18/400)
European regulation update: market infrastructure
European regulation update: market infrastructure

European regulation update: market infrastructure


Focus on the latest European regulatory developments

  • Central Counterparties (CCP) Recovery and Resolution Plans
  • Central Securities Depositories (CSD) Regulation
  • European Market Infrastructure Regulation (EMIR)
  • Markets in Financial Instruments Directive (MiFID) II - Markets in Financial Instruments Regulation (MiFIR)


Market infrastructure


CCP Recovery and Resolution Plans


The Financial Stability Board (FSB) launched a consultation on draft guidance on resolution and resolution planning CCPs. In August 2016 the FSB issued a discussion note on essential aspects of CCP resolution planning. Based on responses to the note, the FSB developed a proposal for guidance to assist authorities and jurisdictions in implementing effective resolution regimes and developing credible resolution strategies and plans for CCPs.

Amongst other things, the consultation sought comments on:

  • The overall objectives of CCP resolution and resolution planning
  • The powers that resolution authorities should have to maintain the continuity of critical CCP functions, return the CCP to a matched book and address default and non-default losses
  • The potential indicators of circumstances that could lead to a determination to trigger resolution
  • The steps authorities should take for CCP resolution planning including assessing resolvability and considerations about the formation of crisis management groups for systemically important CCPs.

The consultation closed on 13 March 2017.

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Central Securities Depositories Regulation (CSDR)


On 24 February 2017, the European Securities and Markets Authority (ESMA) updated its list of competent authorities for CSDs designated in accordance with Article 11(1) of CSDR.  The list was compiled based on the information communicated by the Member States and ESMA will update the information regularly based on further notifications received from the Member States.

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On 10 March 2017, the Level 2 measures under CSDR were published in the Official Journal (OJ). One exception is the (RTS) on the settlement discipline, which is still outstanding.  The package of standards includes

  • One Commission Delegated Regulation (EU) 2017/389 of 11 Nov 2016 on the parameters for the calculation of cash penalties for settlement fails and the operations of CSDs in host Member States
  • One Commission Delegated Regulation (EU) 2017/390 on certain prudential requirements for CSDs and designated credit institutions offering banking-type ancillary services
  • One Commission Delegated Regulation (EU) 2017/391 of 11 November 2016  on the reporting on internalised settlements
  • One Commission Delegated Regulation (EU) 2017/392 of 11 November 2016 on authorisation, supervisory and operational requirements for CSDs
  • One Commission Implementing Regulation (EU) 2017/393 of 11 November 2016 on the templates and procedures for the reporting and transmission of information on internalised settlements
  • Finally, one Commission Implementing Regulation (EU) 2017/394 of 11 November 2016 on standard forms, templates and procedures for authorisation, review and evaluation of CSDs, for:
    • The cooperation between authorities of the home Member State and the host Member State
    • The consultation of authorities involved in the authorisation to provide banking-type ancillary services
    • Access involving CSDs, and with regard to the format of the records to be maintained by CSDs in accordance with the CSDR.


Read more about CDRs:

On 13 March 2017, ESMA published its first set of Q&A on CSDR. The Q&A follows the publication in the OJ of the CSDR Level 2 package. The focus of the Q&A is CSD requirements provisions, which enter into force on 30 March 2017 and trigger the CSD authorisation process. Prospective CSD applicants can apply for authorisation at the end of September 2017.

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Margin requirements


On 15 December 2016, Commission Delegated Regulation (EU) 2016/2251 with regard to RTS for risk-mitigation techniques for over-the-counter (OTC) derivative contracts not cleared by a CCP was published in the OJ. The Delegated Regulation sets out the levels and types of collateral that OTC derivatives counterparties must exchange bilaterally if the transaction is not cleared through a CCP. The margin collected will protect the non-defaulting counterparty against resulting losses should one counterparty to the transaction default. On 4 January 2017, the Delegated Regulation entered into.

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On this topic the Joint Committee of the European Supervisory Authorities (ESAs), published a statement, on 23 February 2017, relating to the operational challenges faced by counterparties in meeting the deadline of 1 March 2017 for exchanging variation margin under EMIR. While noting that the implementation appears to pose a challenge mainly for smaller counterparties, the ESAs express their disappointment that the industry has not managed to prepare in time for the deadline.

The statement emphasises that neither the ESAs nor competent authorities possess any formal power to disapply directly applicable EU legal text – for instance by issuing non-action letters, which exists in some non-EU jurisdictions – and that any further delays of the application of the EU rules would formally need to be implemented through EU legislation, which is not possible at this point in time due to the lengthy process for adopting EU legislation.

However, the ESAs expect national competent authorities to apply their risk-based supervisory powers in the enforcement of the applicable legislation. This approach entails that competent authorities can take into account the size of the exposure to the counterparty plus its default risk, and that participants must document the steps taken toward full compliance and put in place alternative arrangements to ensure that the risk of non-compliance is contained, such as using existing Credit Support Annexes to exchange variation margins. The statement stresses that this approach does not entail a general forbearance, but a case-by-case assessment from the competent authorities on the degree of compliance and progress. In any case, the ESAs and competent authorities expect that the difficulties will be resolved in the coming months and that transactions concluding on or after 1 March 2017 remain subject to the obligation to exchange variation margin.

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The International Organization of Securities Commissions (IOSCO) also issued a statement on variation margin implementation, on 23 February 2017. While reaffirming its commitment to implementation of the margin requirements by 1 March 2017, the IOSCO Board believes that relevant IOSCO members, to the extent permitted by their relevant legal and supervisory frameworks, should consider taking appropriate measures available to them to ensure fair and orderly markets during the introduction and application of such variation margin requirements.

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On 16 December 2016, European Commission (EC) adopted equivalence decisions on CCPs and trading venues in ten non-EU jurisdictions. The Commission determined that India, Brazil, New Zealand, Japan Commodities, United Arab Emirates and Dubai International Financial Centre have equivalent regulatory regimes for CCPs to the EU. The Commission also determined that the rules governing certain financial markets in Australia, Canada, Japan and Singapore can be deemed equivalent to those in the EU.

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On 20 December 2016, the EC adopted a one year extension for the exemption from central clearing for pension funds under EMIR. The temporary exemption will now expire on the 16 August 2018.

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On 4 January 2017, the EC launched a consultation on the delegated act (DA) exempting third country central banks from clearing and reporting requirements under EMIR. The proposed DA adds the central banks and debt management offices (DMOs) of Australia, Canada, Hong Kong, Mexico, Singapore, and Switzerland to the list of exempted entities from clearing and reporting requirements laid out by EMIR. The current list of third-country exempted bodies, published in the OJEU on 19 October 2013, includes only Japan and the US. The consultation closed on 31 January 2017.

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On 5 January 2017, ESMA published a methodology for mandatory peer reviews analysing the supervisory activities of all competent authorities in relation to the authorisation and supervision of CCPs under EMIR. Each peer review will provide an in-depth analysis of a specific topic as well as assessing the overall functioning of CCP colleges.

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On 1 February 2017, ESMA published the framework for its EU wide, systemic risk focused stress test, to be run on all products currently cleared by a selection of 17 CCPs. The required data is requested from CCPs by March 2017 and the results of the stress test will be published in Q4 2017. With this stress test, ESMA intends to probe the resilience of European CCPs.

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On 16 March 2017, the EC adopted the Delegated Regulation extending clearing obligations deadline for Category 3 counterparties to 21 Jun 2019. The Delegated Regulation amends point (c) of Article 3(1) of each of the 3 previous Delegated Regulations so that the phase-in periods for counterparties in Category 3 are extended to 21 Jun 2019. This aligns the date on which all 3 clearing obligations take effect with respect to counterparties in Category 3. The Delegated Regulation will enter into force on the 20th day following its publication in the OJ.

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Trade repositories (TRs)


On 15 December 2016, ESMA launched a consultation on the extension of data available to the public in trade repositories (TRs) as stipulated in EMIR. Under Article 81 of EMIR, ESMA is required to develop draft RTS specifying the frequency and the details of the information to be made available to the relevant authorities and the information to be published by trade repositories. ESMA is setting out proposals to enhance the data made publicly available by TRs and to increase transparency to the public in general as well as allowing the publication of certain figures required by EU regulations such as MiFID2 and the Benchmarks Regulation. The consultation closed on 15 February 2017

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On 22 December 2016, ESMA published the results of a peer review into how national competent authorities (NCAs) ensure CCPs comply with margin and collateral requirements under EMIR. ESMA identified areas where divergences emerged in NCAs' supervisory approaches, including the frequency and depth of the supervision of CCPs of similar size and systemic importance, and differing supervisory approaches to the frequency and proactivity of assessments and reviews relating to margin requirements.

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On 23 January 2017, two amended technical standards on data to be reported to TRs under EMIR have been published in the OJ. The Commission Delegated Regulation (EU) 2017/104 amends Delegated Regulation (EU) 148/2013 with regard to RTS on the minimum details of the data to be reported to TRs. Amongst other things, the revised RTS aim to clarify data fields, and introduce new values to reflect market practice or other necessary regulatory requirements. The Commission Implementing Regulation (EU) 2017/105 amends Implementing Regulation (EU) 1247/2012 laying out implementing technical standards (ITS) with regard to the format and frequency of trade reports to TRs. Both sets of technical standards entered into force on 10 February 2017.

Click here to read the Delegated Regulation 2017/104.

Click here to read the Implementing Regulation 2017/105.


On 31 January 2017, ESMA published a consultation for its draft guidelines on the transfer of data between TRs authorised in EMIR. The six authorised TRs within the EU are required to maintain records of derivative transactions for at least ten years following the termination of the relevant contracts. The need to transfer data to another TR may arise for different reasons. The draft guidelines address separately the situations where the transfer is due to a withdrawal of registration of the TR from the cases in which the transfer is done on a voluntary basis and under normal market conditions. ESMA's draft guidelines establish high-level principles that would need to be followed by the TR participants, reporting entities, counterparties, and CCPs on the one hand, and the TRs on the other. The consultation will close on 31 March 2017.

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EMIR review


On 27 January 2017, ESMA published a letter to the EC on the review of the EMIR. In the letter, ESMA raises various issues related principally to its supervisory and sanctioning powers, which it would like to see addressed by the EC’s draft review proposal. The EC is in the last stages of preparing the review proposal and is expected to publish it at the end of Q1 2017.

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On 16 December 2016, ESMA updated its Q&A document on investor protection topics under MiFID2 and MiFIR. The new Q&As are intended to provide clarity on:

  • Suitability
  • Post sale reporting
  • Inducements
  • Information on charges and costs
  • Underwriting and placement of a financial instrument.

The Q&A is aimed at competent authorities and firms. ESMA intends to review the Q&As on a regular basis and update the document when new questions are received.

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On 19 December 2016, ESMA updated two sets of Q&A on transparency topics and market structures topics and published a new Q&A on commodity derivatives topics under MiFID2 and MiFIR. The updated Q&A on the MiFID2 transparency regime sets out the schedule for waiver applications with respect to making public bid and offer prices and depth of trading interest.  The waivers will be processed in two tranches for:

  • Equity and equity-like instruments, for which trading venues should have submitted waivers to national competent authorities (NCAs) by 1 February 2017 with ESMA intending to complete its review by 31 May 2017
  • Bonds and derivatives, for which trading venues should submit waivers to NCAs by 1 June 2017 with ESMA intending to complete its review by 30 November 2017.

ESMA also clarified, in the Q&A, conditions when existing waivers for shares will require a new waiver application. The Q&A document on market structures has been updated with new answers on algorithmic trading and the mandatory tick size regime. ESMA's new Q&A on commodity derivatives is intended to clarify a number of points on position limits and ancillary activities requirements. ESMA intends to review the Q&As on a regular basis and update the documents when new questions are received.

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On 12 January 2017, ESMA published an opinion on the scope of product intervention powers under MiFIR. Under MiFIR, ESMA and NCAs may temporarily prohibit or restrict the marketing, distribution or sale of certain financial instruments in the EU, including units or shares in UCITS and AIFs (alternative investment funds), whether internally or externally managed, or financial instruments with certain specified features, a type of financial activity or practice.  The MiFIR intervention powers will only apply to MiFID investment firms marketing products which pose risks to retail investors, market integrity, and financial stability in the EU, but do not cover UCITS management companies and Alternative Investment Fund Managers. In its opinion, ESMA intends to draw the attention of the EU institutions to the consequences of the possible lack of clarity it has identified around the exclusions to UCITS management companies and AIFMs from the scope of the powers.  In particular, ESMA highlights the risk of arbitrage where a type of fund that is restricted or banned under MiFIR could be distributed through fund management companies if they decided to market or distribute the funds themselves.

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On the same day, ESMA published a briefing on technical data reporting requirements under MiFID2.  The briefing sets out high-level details of reporting and links to reporting instructions, in particular:

  • instrument reference data
  • transparency data
  • double volume cap data
  • and transaction reporting

On 31 January 2017, ESMA updated two Q&A documents on transparency topics and markets structures topics under MiFID2 and MiFIR. The updated Q&A document on the MiFID2 transparency regime includes four new Q&As on the new systematic internaliser (SI) regime. ESMA intends to review the Q&As on a regular basis and update the documents when new questions are received.

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On 14 February 2017, ESMA wrote to the EC to raise concerns over the potential establishment of networks of systematic internalisers by investment firms to circumvent certain MiFID2 obligations.

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On 25 February 2017, ESMA published a report on the final draft RTS regarding the treatment of package orders under MiFIR. Based on feedback from its consultation on the draft RTS in November 2016, ESMA revised the RTS considerably to narrow the scope of package orders that qualify as having a liquid market as a whole.  ESMA intends to monitor the trading activity in packages closely and may consider amendments to the RTS in the medium term.

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