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Article (18/54)
Regulation update: June - September 2018
Regulation update: June - September 2018

Regulation update: June - September 2018


Keeping pace with regulations impacting financial markets is critical to adapting banking activities on time. As usual, there were several important regulation updates from June to September 2018, both in Europe and at the international level. This article lists all ongoing regulatory developments and provides direct links to the regulatory texts. Regulations are ranked in alphabetical order, from AIFMD/UCITS (European Commission’s proposals on safekeeping duties) to Solvency II, not to mention Brexit developments, EMIR review and the Shareholders’ Rights Directive

Alternative Investment Fund Managers Directive (AIFMD) and Undertakings for the Collective Investment in Transferable Securities (UCITS) Directive

25 May 2018: ESMA - Q&A on UCITS updated.

On 25 May 2018, ESMA (European Securities & Markets Authority) updated its Q&A (Questions & Answers) document on the application of the Undertakings for the Collective Investment in Transferable Securities (UCITS) Directive. Topics covered in the updated file include the application of remuneration disclosure requirements to staff of an UCITS management company to whom investment management functions have been delegated. On 23 July 2018, ESMA  updated the Q&A to include: (i) updates to Section I – General with a new answer to update question 5 on issuer concentration and new Q&A 6 and 7 on UCITS investing in other UCITS with different investment policies and supervision of branches; and (ii) a new Section X – Depositary which includes a Q&A on depositaries as counterparties in a transaction of assets that they hold in custody.

12 July 2018AIFMD & UCITS Directive: EC adopts legislative proposals on depositary safekeeping duties under AIFMD and UCITS Directive
The EC has adopted two Delegated Regulations as regards safekeeping duties of depositaries under the AIFMD and the UCITS Directive. The legislative proposals aim to clarify that UCITS, alternative investment funds (AIFs) and other client assets can be comingled at the level of the first custodian under the condition that they are initially held by the same depositary or are initially held by the same custodian where the latter further delegates the custody of assets down the custody chain. Both Delegated Regulations will enter into force on the twentieth day following that of their publication in the Official Journal and will apply from the first day of the eighteenth month after publication.

23 July 2018 - Alternative Investment Fund Managers Directive (AIFMD): ESMA updates Q&A.

The Q&A documents include new questions and answers on: (i) UCITS investing in other UCITS with different investment policies; (ii) calculation of issuer concentration limits pursuant to Article 52 of the UCITS Directive; (iii) reuse of assets by a UCITS depositary under Article 22(7) of the UCITS Directive; and (iv) the supervision of branches of UCITS Management Companies or AIFMs providing MiFID investment services.

30 July 2018 - UCITS: ESMA publishes findings of peer review on guidelines.

ESMA has published a report setting out the findings of its peer review on ESMA's guidelines on exchange traded funds (ETFs) and other UCITS issues under the UCITS Directive. The guidelines address various issues relating to efficient portfolio management techniques and instruments (EPM), such as transparency and disclosure rules, operational requirements, and rules for risk and collateral management. In its peer review ESMA assessed national competent authorities (NCAs) from Estonia, France, Germany, Ireland, Luxembourg and the UK. While ESMA identified some good practices, it also found deficiencies in the national supervision of UCITS engaging in EPM relating to the operational aspects of costs, fees and revenues for EPM, and collateral management issues. A number of NCA's have advised ESMA of their intention to revise their practices to address the findings in the peer review. ESMA plans to follow up on its findings in 24 months to assess progress made by the NCAs.

2 October  2018 – European Parliament (ECON Committee) publishes draft reports on EC proposals for facilitating cross-border distribution of collective investment funds.

The draft Regulation and Directive would amend the AIFMD, UCITS Directive, the EuVECA Regulation and the EuSEF Regulation. In particular, it is proposed that: (i) in the definition of pre-marketing to professional investors, which is proposed to be inserted in the AIFMD and European Social Entrepreneurship Funds (EuSEF) and European Venture Capital Fund (EuVECA) Regulations, a more targeted approach should be adopted in order to focus on making pre-marketing possible but keeping reverse solicitation from happening; (ii) further simplifications be made relating to the marketing of a fund which has previously been active in a host member state by AIFMs and UCITS managers, ensuring that investors are protected; and (iii) there should be a tighter test for fees that can be charged by competent authorities in relation to cross-border activity of fund managers.


12 July 2018- Brexit: ESMA publishes statement on authorisation request submissions.

ESMA urges regulated entities wishing to continue to provide services in the EU if the UK leaves the EU without an agreement to submit complete and accurate applications for authorisation as soon as possible. ESMA notes that some NCAs have already communicated to entities that authorisation will only be achievable before 29 March 2019 if applications are received in the month of June/July.

20 August 2018 - Brexit: HM Government outlines proposed framework for financial services

HM Government has published a presentation produced by the UK negotiating team for discussion with the EU on the development of the future framework for financial services. The slides, which are dated 25 July 2018, add further detail to what was set out in the Government's White Paper and call for a mutually acceptable solution that encourages both parties to work together constructively, protecting financial stability, and respecting the principle of autonomous decision-making, under which each party would determine its own rulebook and assess whether access to its market is maintained. In particular, the presentation includes: (1) an overview of the key features of the UK position; (2) proposals for a bilateral agreement to overcome deficiencies in the existing third country regime; (3) international precedents to build on; and (4) proposals for three pillars for the new, bilateral economic and regulatory arrangement: (i) common principles for the governance of the relationship; (ii) extensive supervisory cooperation and regulatory dialogue; and (iii) predictable, transparent and robust processes.

11 September 2018 - European Parliament adopts resolution on EU relationships with third countries concerning financial services regulation and supervision

The resolution notably calls for: (i) the EC to adopt a clear framework for a transparent, coherent and consistent application of equivalence procedures; (ii) decisions to be subject to ongoing monitoring by the relevant ESA to address the relevant legislation, enforcement practices and supervisory practices in the third country concerned; (iii) the EC to assess whether the current equivalence regime contributes to achieving a level playing field between EU and third-country financial institutions; (iv) the EC to consider the possibility of introducing an application process for granting equivalence.

Capital Markets Union (CMU)

1 June 2018 - EU Council Presidency publishes compromise texts on cross-border distribution of collective investment funds

The EU Council Presidency published compromise texts on the EU Commission's proposals for a Directive amending the UCITS Directive and the AIFMD with regard to cross-border distribution of collective investment funds and a Regulation on facilitating cross-border distribution of collective investment funds.

1 June 2018 - EU Commission adopts Delegated Regulation on regulatory capital requirements for STS securitisations held by insurance undertakings

As part of its work on the Capital Markets Union (CMU) the Commission adopted a proposal for a regulation on STS Securitisation and a proposal for an amendment to the Capital Requirements Regulation (CRR). These Regulations entered into force on 17 January 2018 and will apply as from 1 January 2019. A Delegated Act detailing implementing rules under the Solvency II Directive, including risk calibrations for the calculation of capital charged for specific asset categories, was adopted by the Commission in October 2014. The Delegated Act adopted by the Commission makes changes to the Solvency II Delegated Act to ensure alignment and consistency, including: (i) aligning the definitions used in the Solvency II Delegated Act regarding securitisation with those in the STS Regulation; and (ii) repealing specific provisions in the Solvency II Delegated Act to avoid insurers being subject to different requirements under the STS Regulation and the Solvency II Delegated Act. The Delegated Act will apply as of 1 January 2019 if the EU Council and the Parliament raise no objections.

16 July 2018: ESMA submits final draft RTS and ITS on securitisation

The draft RTS and ITS  specify: (i) the information and format that originators and sponsors are required to provide ESMA to comply with the STS notification obligations; (ii) the information to be provided for the authorisation of a third party assessing the compliance of securitisations with the STS criteria; and (iii) the standardised templates to be used for the provision of the STS notification.

31 July 2018: EBA publishes draft RTS on homogeneity of underlying exposures and risk retention for securitisations

The European Banking Authority (EBA) has published two final draft regulatory standards (RTS) under the Simple, Transparent and Standardised (STS) Securitisation Regulation. The first draft RTS set out criteria for the underlying exposures in securitisation to be considered homogeneous. In order to assess homogeneity, the draft RTS specify asset categories as well as lists of the homogeneity factors available for the majority of the asset categories, reflecting the market practice. These draft RTS apply to both asset-backed commercial paper (ABCP) and non-ABCP securitisations. The second draft RTS, developed according to Article 6 of the STS Regulation, specify the requirements for originators, sponsors and original lenders related to risk retention ensuring that they retain at least 5% of material net economic interest in each securitisation. These draft RTS replace the current Delegated Regulation on risk retention under the Capital Requirements Regulation (CRR).

10 September 2018 Delegated Regulation on capital requirements for STS securitisations held by insurance undertakings published in Official Journal

Amongst other things, the Delegated regulation  updates the definitions used in Solvency II regarding securitisation to align with those in the Securitisation Regulation. It also repeals risk retention and due diligence requirements in Solvency II to avoid insurers being subject to different requirements under the Securitisation Regulation and Solvency II. The Delegated Regulation will enter into force on 30 September 2018 and will apply from 1 January 2019.

Central Securities Depositories Regulation (CSDR)

25 May 2018 – Central Securities Depositories Regulation (CSDR): EC adopts Delegated Regulation on settlement discipline

The RTS cover measures for preventing settlement fails, through processes and functionalities including automated matching, partial settlement and a hold and release mechanism. The RTS also set out measures for monitoring and addressing settlement fails, in particular, the cash penalties mechanism and the buy-in process.

13 September 2018 - CSDR: Delegated Regulation on settlement discipline published in Official Journal

The Delegated Regulation covers measures for preventing settlement fails through processes and functionalities including automated matching, partial settlement and a hold and release mechanism. The RTS also set out measures for monitoring and addressing settlement fails, in particular, the cash penalties mechanism and the buy-in process. The implementation date of the CSDR settlement discipline is now planned for Monday, 14 September 2020, following a phase-in period of 24 months.

27 September 2018 - CSDR: ESMA publishes updated Q&A

ESMA has published updated Q&A on the implementation of the CSDR. The document has been updated to include a new Q&A relating to settlement discipline and organisational requirements.

European Market Infrastructure Regulation (EMIR)

4 June 2018 - Extension to transitional periods related to own funds requirements for exposures to CCPs published in Official Journal

The Regulation specifies that the 15-month periods referred to in the Capital Requirements Regulation and in the European Market Infrastructure Regulation (EMIR), are extended by an additional six months until 15 December 2018.

19 June 2018 - European Parliament (ECON Committee) supports European Central Bank (ECB) recommendation on regulatory competence over clearing systems

The ECON Committee has indicated that the new ECB powers should be restricted to monetary policy purposes and included an indicative list of regulatory powers, such as reporting requirements, that the ECB would apply under the amended Article 22 of the ECB Statute.The text will now be voted on during an upcoming plenary session in July or September.

3 July 2018 - EMIR: ESMA issues statement on clearing obligation for pension scheme arrangements.

ESMA highlights the challenges that certain PSAs would face if they begin clearing their OTC derivative contracts when the current exemption expires on 17 August 2018. NCAs are expected not to prioritise their supervisory actions towards entities that should be exempted again in a relatively short period of time.

11 July 2018 - EMIR: ESMA consults on clearing obligation.

The consultation proposes an amending draft RTS with regard to the treatment of intragroup transactions with a third country group entity. Comments to the consultation closed on 30 August 2018.

12 July 2018 EMIR: ESMA publishes updated Q&A on implementation

On 12 July 2018, ESMA published an update to its Q&As on the implementation of EMIR. The Q&A have been updated to include: (i) a new general question on funds, counterparties; (ii) an update to question 40 in the trade repositories (TR) section on legal entity identifier (LEI) changes due to mergers and acquisitions; and (iii) a new section on OTC Reporting Scenario with a question on reporting to TRs. On 26 September 2018, ESMA has issued an update of its Q&A document on the implementation of EMIR to include new Q&A on reporting of FX swaps and access models for central counterparties (CCPs).

8 August 2018 EMIR: ESMA publishes communication on clearing obligation for pension scheme arrangements

ESMA has published an updated statement on the clearing obligation and trading obligation for pension scheme arrangements (PSAs) under EMIR.

23 August 2018 – US: CFTC proposes amendments to its swap clearing requirement to ease regulatory burdens for certain financial institutions

The US Commodity Futures Trading Commission (CFTC) has proposed to amend its swap clearing requirement to exempt certain swaps entered into with certain bank holding companies, savings and loan holding companies, and community development financial institutions. As proposed, CFTC regulation 50.5 would be amended to exempt from the clearing requirement a swap entered into to hedge or mitigate commercial risk if one of the counterparties to the swap is either: (i) a bank holding company or savings and loan holding company, each having no more than USD 10 billion in consolidated assets; or (ii) a community development financial institution transacting in certain types and quantities of swaps. This proposal is consistent with no-action relief granted in 2016 by the CFTC's Division of Clearing and Risk.

27 September 2018 - EMIR: ESMA publishes final report amending RTS on clearing obligation for intragroup transactions

ESMA has published its final report on the clearing obligation under EMIR (No. 6). Currently there are three Delegated Regulations on the clearing obligation, mandating a range of interest rate and credit derivative classes to be cleared. These regulations include a deferred date of application of the clearing obligation for intragroup transactions satisfying certain conditions and where one of the counterparties is a third country group entity in the absence of the relevant equivalence decision. To date there have not been any equivalence decisions with regard to the clearing obligation. In July 2018 ESMA consulted on amending draft regulatory technical standards (RTS) to extend the date of deferral. The final report sets out the finalised version of the draft RTS amending the current Delegated Regulations on the clearing obligation with respect to the deferred date of application for certain intragroup transactions with a third country group entity, and feedback from the consultation. ESMA has submitted the draft RTS to the Commission for endorsement.

Fintech and new technologies

3 July 2018 - Fintech: EBA publishes thematic reports

The European Banking Authority (EBA) has published two thematic reports on fintech, which represent the first products of the EBA's Fintech Roadmap. The reports consider the impact of fintech on incumbent credit institutions' business models and prudential risks and opportunities arising for institutions from fintech.

10 August 2018 - European Parliament (ECON Committee) publishes draft report on proposed crowdfunding regulation

The ECON Committee has published its draft report on the proposal for a regulation on European Crowdfunding Service Providers (ECSPs) for Business. The EC is seeking to enable crowdfunding platforms to offer their services throughout Europe and to unlock early stage financing for businesses through its proposal for a Crowdfunding Regulation and its proposal to amend MiFID2. The proposal for a Crowdfunding Regulation is the first deliverable of the EC’s Action Plan on how to harness the opportunities presented by fintech. Overall, the draft report welcomes the EC’s proposal, but recommends a number of changes to improve the proposed regulation, particularly concerning: (i) the threshold for crowdfunding offers that fall under the scope of the CSPs; (ii) the responsibility of NCAs; (iii) the differentiation between simple and complex crowdfunding structures; (iv) the expansion of scope to initial coin offerings; and (v) the level playing field towards third-country crowdfunding platforms.

5 September 2018 – European Supervisory Authorities (ESAs) report on automation in financial advice

The report found that: (i) the risks and benefits already identified in the previous reports were largely confirmed by the analysis; (ii) automation in financial advice is slowly growing but remains limited; and (iii) services being offered are largely through partnerships between established financial intermediaries rather than by pure fintech firms

International regulations

21 June 2018 - FSB publishes guidance on bail-in execution and resolution funding for G-SIBs

The guidance assists authorities when implementing the FSB's Key Attributes of Effective Resolution Regimes and sets out principles to assist authorities when making bail-in strategies operational. It also covers the development of a resolution funding plan for G-SIBs.

7 August 2018 - FSB, Basel Committee, CPMI and IOSCO jointly publish consultative report on incentives to centrally clear OTC derivatives

The Financial Stability Board (FSB) has published a consultative document jointly with the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructure (CPMI) and the International Organization of Securities Commissions (IOSCO) on incentives to centrally clear OTC derivatives.  The report is a post-implementation evaluation of the effects of the G20 financial regulatory reforms and considers how the reforms interact and how they could affect incentives. Overall, the report identifies that the reforms are achieving their goals of promoting central clearing, especially for the most systemic market participants.  However, beyond the systemic core of the derivatives network, the incentives are less strong. As such, the report sets out potential areas of reform. The report is intended to inform relevant standard setting bodies and, if warranted, provide a basis for fine-tuning the post-crisis reforms, in line with the objective to reduce complexity and improve transparency and standardisation in the OTC derivatives markets.

9 August 2018 - International standard-setting bodies jointly report on interdependencies between CCPs

The International Organization of Securities Commissions (IOSCO), Basel Committee on Banking Supervision (BCBS), Committee on Payments and Market Infrastructures (CPMI) and the Financial Stability Board (FSB) have jointly published a second report mapping interdependencies between central counterparties (CCPs) and their clearing members and other financial services providers. The report follows a first report published in July 2017. In 2016 the international standard-setting bodies collected data from 26 CCPs across 15 jurisdictions to further understand and quantify the interconnections between CCPs and the rest of the financial system. After reviewing the findings, the standard-setting bodies agreed to conduct another, more streamlined data collection in 2017 with the same group of 26 CCPs. Overall the results of the second exercise are broadly consistent with the first, and among other things: (i) prefunded financial resources are concentrated at a small number of CCPs; (ii) exposures to CCPs are concentrated among a small number of entities; (iii) the relationships mapped are characterised, to varying degrees, by a core of highly connected CCPs and entities and a periphery of less highly connected CCPs and entities, although less highly connected CCPs are often linked to at least one highly connected entity; (iv) a small number of entities tend to dominate the provision of each of the critical services required by CCPs; and (v) clearing members and clearing member affiliates are also important providers of other critical services required by CCPs and can maintain several types of relationships with multiple CCPs simultaneously. The report is intended to inform the ongoing policy work on CCP resilience, recovery planning and resolution. It may also provide inputs for designing a supervisory stress testing framework.

Markets In Financial Instruments Directive (MIFID 2)/MIFIR

20 June 2018 - MiFID II / MiFIR: ESMA updates Q&A

On 20 June 2018, ESMA updated its Q&A on temporary product intervention measures. The Q&A provides clarification on the application of the temporary product intervention measures on clients established outside the EU and non-EU nationals. It is aimed at market participants and is intended to promote common supervisory approaches and practices in the application of ESMA’s temporary product intervention measures in relation to the marketing, distribution or sale of CFDs and binary options to retail clients.
On 12 July 2018, ESMA updated its Q&A on transparency topics and sets out plan for systematic internaliser regime calculations. The Q&A contains details of ESMA's action plan for systematic internaliser (SI) regime calculations, ahead of their publication on 1 August 2018. The action plan focuses on equity, equity-like instruments and bonds while postponing the publication for derivatives and other instruments to 1 February 2019.
On 12 July 2018, ESMA also updated its Q&A on investor protection and intermediaries. The Q&A has been updated with new answers to questions on: (i) inducements (research); and (ii) the provision of investment services by third country firms.

1 August 2018 MiFID2: ESMA publishes SI calculations data for equity and equity-like instruments and bonds

ESMA has published data for the systematic internaliser calculations, which sets out the total number of trades and total volume over the period January – June 2018 for 9173 equity and equity-like instruments and 73828 bonds. The results are published for those instruments for which trading venues submitted data for at least 95% of all trading days over the period and incorporates OTC trading to the extent it has been reported to ESMA. ESMA expects to publish the data for systematic internaliser calculations for ETCs, ETNs, SFPs, securitised derivatives, emission allowances and derivatives covering a period from 1 July 2018 to 31 December 2018 from 1 February 2019.

2 August - MIFID2: ESMA makes new bond liquidity data available

ESMA has made available new data for bonds subject to the pre- and post-trade requirements of MiFID2 and MiFIR through its data register. ESMA has started to make available the second quarterly liquidity assessment for bonds since 30 July. However, this assessment experienced data quality issues. ESMA will proceed to update the publication ahead of the day of application of the liquidity classification on 16 August. This issue is also affecting the systematic internalisers regime publication for non-equity, published on 1 August. The content of the non-equity file has now been updated by removing the affected instruments. The list of assessed bonds is available through ESMA’s Financial Instruments Transparency System (FITRS) in the XML files with publication date from 30 July 2018.

6 August 2018- MiFID2: ESMA revises transitional transparency calculations

ESMA has updated its MiFID2/MiFIR transitional transparency calculations (TTC) for equity derivatives, equity and equity-like instruments and tick size band assessment.  Alongside the revisions the frequently asked questions (FAQs) have also been updated.  The new version of the TTC files is to be used by market participants, infrastructures and authorities under the regulatory framework from 13 August 2018.

31 August 2018 - MiFID2: ESMA publishes compliance table on guidelines on product governance requirements

The table sets out details of which NCAs have informed ESMA that they comply and which NCAs intend to comply with the guidelines, including the date from which those NCAs intend to comply. The table indicates that all EU and EEA NCAs have indicated that they either comply or intend to comply with the guidelines.

21 September 2018 - MiFIR: ESMA agrees to EC’s proposed amendments to RTS 1

ESMA has published an opinion, accompanied by a letter to the EC, on the latter’s revised proposal for amendments to Commission Delegated Regulation (EU) 2017/587 on RTS under MiFIR. RTS 1 sets out transparency requirements for equity instruments, including the quoting obligations for systematic internalisers (SIs). ESMA proposed to tie SI quotes to price levels that can be traded on trading venues for all equity and equity-like instruments and ESMA remains of the view that its proposal would better meet the legislative intent of the empowerment under Article 14(7) MiFIR. However, ESMA agrees with the EC that any concerns about efficient valuation and price formation are more relevant for shares and depository receipts. As such, ESMA has agreed to the reformulation of Article 10 in RTS 1. ESMA has also agreed to other technical amendments proposed by the EC.

26 September - ESMA updates Q&A on MiFIR data reporting

ESMA updated its Q&A document on MiFIR data reporting. The Q&A has been updated with four new entries on: (i) FX and interest rate swaps reporting, specifically reference data and transaction reporting scenarios relating to MiFIR RTS 23 and 22, as well as Field 41 for interest rate reporting; and (ii) FIRDS fields 8 to 11.

28 September 2018 - ESMA renews product intervention measure on contracts for differences (CfDs)

ESMA has renewed its product intervention decision under its MiFIR product intervention powers in relation to CfDs. Marketing, distribution or sale of CFDs to retail clients will continue to be restricted, including: (i) leverage limits on the opening of a position by a retail client; (ii) a margin close out rule on a per account basis; (iii) negative balance protection on a per account basis; (iv) a restriction on the incentives offered to trade CFDs; (v) a standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts; and (vi) a new reduced character risk warning. The measure will apply for three months from 1 November 2018.

27 September 2018 - European Parliament (ECON Committee) publishes reports on prudential rules for investment firms

The ECON Committee has published the reports adopted on the legislative proposals to amend the current EU prudential rules for investment firms. The proposals for a directive and a regulation would amend the existing prudential framework set out in the Capital Requirements Regulation (CRR) and Directive (CRD 4) and in MiFID2 and MiFIR. The proposals will be considered in trilogue negotiations once the EU Council has reached political agreement on a negotiating stance.

2 October 2018 - MiFID2: ESMA updates Q&A on commodity derivatives topics

ESMA has provided new or modified answers relating to: (1) position limits, specifically whether position limits also apply to positions in contracts that were entered into prior to 3 January 2018 and are traded on a trading venue, including an OTF, or are economically equivalent OTC contracts (EEOTC) to those traded on a trading venue; (2) ancillary activity, specifically: (i) whether a parent undertaking can notify its national competent authority (NCA) for a whole group; and (ii) whether the denominator in the capital test under Article 3(9) of RTS 20 be calculated using consolidated accounts; and (3) position reporting, relating to types of firm that fall within each of the ITS 4 categories for the purposes of the weekly Commitment of Trader (CoT) reports. One question on the ancillary activity test (Q.13) has been deleted.

1 October 2018 - MiFID2: ESMA writes to Commission on third-country regimes in the context of Brexit

The letter follows up on a first letter dated 20 November 2017, which set out concerns relating to: (i) the MiFID2 third country regime with respect to firms dealing on own account; (ii) the lack of an EU-wide regime for third country trading venues accessing the EU market and placing trading screens; and (iii) the lack of a suspension regime for the trading obligation for derivatives. The follow-up letter sets out four additional issues that have been identified in the context of the discussion on the risks arising from the UK withdrawal from the EU. However, the letter notes that the issues are viewed by ESMA as being more general and applying beyond the Brexit debate. ESMA's concerns relate to: (i) the MiFIR regime for third country firms providing investment services and activities to eligible counterparties and professional clients, noting that the Commission's proposals for new prudential requirements for investment firms may need further improvements and setting out ESMA's view that the MiFIR regime does not ensure a consistent and convergent level of protection to investors interacting with third country firms; (ii) the MiFID2 regime for third country firms providing investment services and activities to retail and professional clients on request, on which ESMA suggests that the Commission may wish to consider the opportunity for further harmonisation of the national regimes; (iii) reverse solicitation, noting the importance of the topic in the context of Brexit and recommending that the Commission reviews the MiFID2 framework in order to mitigate the effects of reverse solicitation; and (iv) investment firms outsourcing critical or important functions other than those related to portfolio management to third country providers, suggesting a stricter regime under MiFID2 to ensure a higher level of investor protection.

1 October 2018 - MiFID2: ESMA publishes opinion on ancillary activity calculations

ESMA has published an updated opinion on ancillary activity calculations, which provides an estimation of the market size of commodity derivatives and emission allowances for 2017 based on data collected from trading venues as well as data reported to trade repositories under EMIR. Under Article 2(3) of regulatory technical standards (RTS) 20 (Commission Delegated Regulation (EU) 2017/592), a calculation of the overall market trading activity is necessary for the establishment of the size of trading activity per market participant which ultimately determines whether an activity is ancillary, and hence, whether a market participant falls within the scope of MiFID2. National competent authorities (NCAs) and market participants requested that ESMA provide guidance for the determination of the market size figures to ensure the correct application of Article 2(3) of RTS 20 and, as such, ESMA has issued its opinion. ESMA considers the guidance will contribute positively to the consistency of supervisory practices and will ensure a uniform approach across the EU.

Money Market Funds (MMFs)

13 July 2018 - Money Market Funds (MMFs): Delegated Regulation on STS securitisations and asset-backed commercial papers published

The Delegated Regulation aims to ensure that MMFs are invested in appropriate eligible assets by setting out MMF investment requirements and providing an overview of and single point of access to them. The Delegated Regulation will enter into force on 2 August 2018 and will apply from 21 July 2018, except for Article 1 which will apply from 1 January 2019.

20 July 2018 - MMFs: ESMA calls on EC to provide clarity on share cancellation

ESMA has published a letter requesting the EC publish its opinion on the compatibility of the reverse distribution mechanism i.e. share cancellation, with the MMF Regulation (MMFR). ESMA notes that the EC has already provided some market participants with the text of the opinion of the Legal Service of the Commission on the compatibility issue, and encourages making that interpretation clear to the wider public to ensure a proper and consistent interpretation and implementation of the MMFR. The MMFR came into effect on 21 July 2018.

28 September 2018 - MMF Regulation: ESMA consults on stress testing rules

ESMA has issued a consultation on draft guidelines for stress test scenarios under the Money Market Funds Regulation. Under Article 28 of the MMF Regulation, ESMA must develop guidelines that establish common reference parameters of the stress test scenarios to be included in the stress tests managers of MMFs are required to conduct. The guidelines must be updated annually taking into account recent market developments. ESMA published its first set of guidelines in March 2018. In this consultation, ESMA particularly seeks views on the methodology, risk factors, data and the calculation of the impact. Comments to the consultation close 1 December 2018. The final guidelines will include the calibration of the stress test scenario for implementation.

Packaged Retail and Insurance-based Investment Products (PRIIPs)

20 July 2018 - ESAs publish guidance on Key Information Document for Packaged Retail and Insurance-based Investment Products (PRIIPs)

The guidance seeks to promote common supervisory approaches and practices based on ongoing work to monitor the implementation of the KID. It supplements material published last year prior to implementation.

1 October 2018 - PRIIPs: ESAs write to EU Commission on duplication of key information documents

The Joint Committee of the ESAs, which comprise the EBA, European Insurance and Occupational Pensions Authority (EIOPA) and ESMA, have written to the EC raising concerns regarding the possible duplication of information requirements for investment funds under the PRIIPs and UCITS Regulations. The EC wrote to the ESAs in July and August 2018 stating that there would be a deferral of the review of the PRIIPs Regulation and requesting guidance regarding the information that should be disclosed by investment funds. The ESAs are concerned that an approach where retail investors would receive both PRIIPS key information documents (KIDs) and UCITS key investor information documents (KIIDs) as of 1 January 2020 would not be satisfactory and would risk undermining the aims of the PRIIPs Regulation.

Securities Financing Transactions Regulation (SFTR)

23 July 2018 - Securities Financing Transactions Regulation (SFTR): EC signals intention to amend ESMA's draft technical standards on details of SFTs to be reported to trade repositories

The EC’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union has published a communication to the Commission on the intention to endorse with amendments RTS drafted by the ESMA under the SFTR on the details of SFTs to be reported to trade repositories and implementing technical standards (ITS) on the format and frequency of such reports. The communication invites the EC to approve a letter advising ESMA that it has amended provisions in the draft technical standards that envisage the mandatory use of potentially forthcoming industry standards relating to LEIs and unique trade identifiers (UTIs) for reporting to TRs once these standards are endorsed by ESMA in the future.

5 September 2018 - SFTR: ESMA publishes opinion rejecting EC proposals to amend technical standards on reporting

ESMA takes the view that the EC’s proposals would: (i) hinder the possibility to take into account international developments and reporting standards agreed at global level; (ii) deviate from and create inconsistency with the currently applicable EMIR reporting standards; (iii) not provide certainty, clarity, predictability and consistency, which is essential for the market and public authorities in relation to reporting standards; and (iv) result in a significantly extended timeline for the introduction of global standards in the EU.

Shareholder Rights Directive (SRD)

4 September 2018 - Shareholder Rights Directive: Commission Implementing Regulation on minimum requirements published

Among other things, the Directive is intended to improve the communication by listed companies to their shareholders, in particular the transmission of information along the chain of intermediaries and requires intermediaries to facilitate the exercise of shareholders rights. The national law of the registered office of the issuer will determine which obligations intermediaries need to comply with in order to facilitate the exercise of rights by shareholders. The Implementing Regulation will enter into force on 24 September 2018 and will apply from 3 September 2020. It is worth noting that the transposition in the UK in unclear at this stage given the current Brexit discussion.

Short Selling Regulation

28 May 2018 - Short Selling Regulation: ESMA updates Q&A on easy-to-borrow lists and locate arrangements

ESMA updated its Q&A further specifying the requirements for ‘easy-to-borrow and purchase’ lists in the Q&A on the Short Selling Regulation (236/2012 – SSR). The update takes the form of a redline comparison showing the changes that have been made to both the question and the answer.

Solvency 2

31 July 20187 - Solvency II: Implementing Regulation on technical information for calculation of technical provisions and own funds published in Official Journal

Commission Implementing Regulation (EU) 2018/1078 has been published in the Official Journal.  The Regulation lays down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 June until 29 September 2018 in accordance with Solvency II. The Regulation lays down technical information on relevant risk-free interest rate term structures, fundamental spreads for the calculation of the matching adjustment and volatility adjustments for every reference date. Commission Implementing Regulation (EU) 2018/1078 will enter into force on 1 August 2018 and will apply from 30 June 2018.

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