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European regulation update: market infrastructure
European regulation update: market infrastructure
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European regulation update: market infrastructure

23/10/2017

Focus on the latest European regulatory developments

Markets in Financial Instruments Directive (MiFID) II - Markets in Financial Instruments Regulation (MiFIR)

On 13 July 2017, ESMA published a consultation on a new draft of the guidelines on certain aspects of product suitability. The purpose of these new guidelines is to enhance clarity and foster convergence in the implementation of certain aspects of the new MiFID II suitability requirements, replacing the existing ESMA guidelines on product suitability from 2012. Industry feedback is expected before 13 October 2017.

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MiFIR: on 11 September 2017, the EU Commission reports on exchange-traded derivatives exemption.

The EU Commission has published a report on the need to temporarily exclude exchange-traded derivatives from the scope of Articles 35 and 36 of the Markets in Financial Instruments Regulation (MiFIR). The report provides a risk assessment for open and non-discriminatory access provisions in MiFIR and discusses the exchange-traded derivatives market structure.

The report concludes that the current regulatory framework in MiFIR and the European Market Infrastructure Regulation (EMIR) appropriately addresses the potential risks identified and, on this basis, it is not necessary to temporarily exclude exchange-traded derivatives from the scope of Articles 35 and 36.

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MiFID2: on 11 September 2017 ESMA announces recalculation of transitional transparency calculations and publishes FAQ.

The European Securities and Markets Authority (ESMA) has updated its transitional transparency calculations (TTC) for non-equity instruments in accordance with RTS 2 on transparency requirements in respect of bonds, structured finance products, emission allowances and derivatives under MiFIR.

ESMA published the TTC for all non-equity instruments except for bonds on 3 July 2017. Since publication, some trading venues have notified ESMA of problems in their submitted data.  As such, ESMA has corrected and recalculated the TTC for both asset classes accordingly. Alongside a press release on the recalculation, ESMA also published FAQs on the TTC.

 

MiFID2/R: on 12 September 2017, ESMA updates Q&A on market structures topics. The European Securities and Markets Authority (ESMA) has updated its question and answers (Q&A) document on market structures topics under the Markets in Financial Instruments Directive (MiFID2) and Regulation (MiFIR).

The updated Q&A document answers questions on:

  • The timing and procedure of notifications for temporary opt-out under Article 36(5) MiFIR
  • Exemptions under Article 36(5) and Article 54(2) of MiFIR
  • The timing of applications for transitional arrangements under Article 54(2) of MiFIR
  • Limitations of access rights following exemption under Article 36(5) of MiFIR

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MiFIR: on 15 September 2017, ESMA sets out procedure for ETDs opt-out of access provisions.

The European Securities and Markets Authority (ESMA) has issued its procedure (ESMA70-154-259) for verifying and approving notifications from trading venues for the temporary opt-out of exchange-traded derivatives (ETDs) from the access provisions under the Markets in Financial Instruments Regulation (MiFIR).

The procedure is aimed at trading venues whose annual notional amount traded in ETDs falls below a certain threshold (annual notional amount traded of EUR 1 000 000 million in the calendar year preceding the date of application of MiFIR) and therefore qualify for the time-limited exemption to provide central counterparties (CCPs) with access to trade feeds.

If a trading venue wishes to opt-out, it must notify ESMA and its competent authority of its intention before 3 January 2018.

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MiFIR: on 22 September 2017, the EU Commission adopts Delegated Regulations on indirect clearing.

The EU Commission has adopted two Delegated Regulations on indirect clearing arrangements for exchange traded derivatives (ETD) under the Markets in Financial Instruments Regulation (MiFIR).

In December 2012 the Commission adopted a Delegated Regulation specifying the types of indirect clearing arrangements that can be used to fulfil the clearing obligation set out in Article 4 of the European Market Infrastructure Regulation (EMIR) for the over-the-counter (OTC) derivatives pertaining to a class that has been declared subject to that obligation.

The Commission has adopted a Delegated Regulation amending the earlier Delegated Regulation to reflect recent developments and experience gained in the area of clearing. The amendment also relates to the adoption of regulatory technical standards (RTS) to be developed under Article 30 of MiFIR specifying the types of indirect clearing arrangements for exchange-traded derivatives (ETDs).

The second Delegated Regulation adopted by the Commission specifies the types of indirect clearing arrangements that can be used for ETDs.

Together, the two new Delegated Regulations are intended to:

  • Simplify and clarify the requirements that relate to the management of the default of a client providing indirect clearing services
  • Adapt account structures in order to rationalise the offering of indirect clearing services
  • Allow indirect clearing services to be provided in chains going beyond the client of a direct client provided that appropriate and equivalent protection is ensured throughout the chain
  • Set out homogeneous requirements for indirect clearing arrangements relating to both OTC and ETD derivatives

Both delegated acts will enter into force on the twentieth day following that of their publication in the Official Journal and will apply from 3 January 2018.

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MiFID: on 26 September, the EU Commission adopts Delegated Regulation on transactions for data reporting services providers. The EU Commission has adopted a Delegated Regulation with regard to regulatory technical standards (RTS) on the authorisation, organisational requirements and the publication of transactions for data reporting services providers (DRSP) under MiFID2.

Data reporting services (DRS) operated by data reporting services providers are subject to authorisation and supervision under MiFID2. Data reporting services include the operation of approved reporting mechanisms (ARM), approved publication arrangements (APAs) and consolidated tapes (CT).

MiFID2 provides for the possibility of establishment of a consolidated tape for equity and non-equity financial instruments. In September 2015, the European Securities and Markets Authority (ESMA) submitted draft RTS specifying the scope of the equity consolidated tape providers (CTPs) that were adopted by the Commission in Delegated Regulation (EU) 2017/571.

Given the higher complexity for establishing and operating a non-equity tape, ESMA delivered the draft RTS specifying the scope of non-equity consolidated tape providers, which the Commission has now adopted, after the draft RTS on equity consolidated tape providers.

The delegated act will enter into force on the twentieth day following that of its publication in the Official Journal and will apply from 3 September 2019.

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