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EU Regulatory Update

Council of the EU Publishes “Presidency Issues Note” for ECOFIN Meeting

On 20 October, the Council of the EU published a “Presidency issues note” for a 7 November 2017 meeting of the European Economic and Financial Affairs Council (“ECOFIN”) regarding the review of the European System of Financial Supervision (“ESFS”). The note refers to the European Commission’s review of the ESFS announced on 20 September 2017, in which the Commission presented three legislative proposals, and “invites Ministers to express their views” on: (i) whether the co-legislators should, in addition to “improv[ing] the functioning of the ESFS, . . . prepare the ESFS for potential future challenges”; (ii) whether there are “elements of the ESFS review package which should be prioritised in order to address short-term challenges”; and (iii) “which areas and to what extent should the powers of the European Supervisory Authorities be strengthened with a view to creating a more integrated supervisory framework.”

European Commission Launches Consultation on Roadmap for Fitness Check of Supervisory Reporting Requirements

On 17 October, the European Commission published for consultation a roadmap regarding its “fitness check of supervisory reporting requirements in financial services legislation.” According to the roadmap, the fitness check is being conducted to “analyse the shortfalls associated with supervisory reporting,” and includes examining: (i) “whether the requirements are meeting their objectives (effectiveness, relevance, EU added value)”; (ii) “whether the different reporting frameworks are consistent with one another (coherence)”; and (iii) “whether the cost and burden of the reporting obligations is reasonable and proportionate (efficiency).” The roadmap also notes that due to the significant number of legislative acts and corresponding reporting requirements involved, the present assessment will be “limited to primary (Level 1) legislation, with a more in-depth look at certain specific products (e.g. derivatives) where a more granular approach to reporting is used.” Lastly, the roadmap explains that as part of the fitness check, a public consultation will be launched in Q4 2017, which will be open for 12 weeks. The consultation period for the roadmap closes on 14 November 2017.

European Commission Request ESAs to Produce Recurrent Reports on Cost and Past Performance of Retail Investment, Insurance and Pension Products

On 13 October, the European Commission issued a request to the European Supervisory Authorities (EBA, EIOPA, and ESMA) to publish “recurrent reports on the cost and past performance of the main categories of retail investment, insurance and pension products.” The Commission asked that the reports “be based on data and information originating from disclosures and reporting already required by Union law (e.g. UCITS, MiFID/MiFIR, IDD, IORP and PRIIPs) or national legislations.”

European Commission Publishes Work Programme for 2018

On 24 October, the European Commission published its work programme for 2018, which contains several annexes regarding: (i) new initiatives; (ii) regulatory fitness and performance (“REFIT”) initiatives; (iii) priority pending [legislative] proposals; (iv) pending legislative proposals that the European Commission intends to withdraw; and (v) legislation that the European Commission intends to repeal. As noted in the work programme, key initiatives for 2018 include: (i) creating a “connected Digital Single Market,” including completing a number of proposals made by the Commission on 13 September 2017 (JOIN(2017)450 Communication) to address cybersecurity; and (ii) completing the Capital Markets Union. To complete the Capital Markets Union, the Commission will: (i) “make proposals to tackle the interaction between finance and technology”; (ii) “propose rules on crowd and peer-to-peer funding”; (iii) reduce barriers to cross-border distribution of investment funds”; (iv) “present an initiative on sustainable finance”; and (v) “propose new rules on cross-border payments covering the non-Euro currencies.”

ESMA Publishes its Work Programme for 2018

On 5 October, ESMA published its work programme for 2018. Key priorities identified for 2018 include: (i) “promoting supervisory convergence” by, among other things, the implementation of new supervisory requirements, completion of IT systems “either required by legislation or which increase ESMA’s and/or NCAs’ efficiency,” and convergence tools, including peer reviews and stress tests; (ii) “assessing risks to investors, markets and financial stability,” through enhanced analytical stress tests, data management, and statistics capabilities; (iii) “completing the single rulebook for EU financial markets,” by “complet[ing] technical standards and technical advice related to key legislative developments” and “maintain[ing] the existing Single Rulebook”; and (iv) “directly supervising specific financial entities (CRAs and TRs),” and “intensify[ing] supervision to ensure compliance with the spirit of the regulation.”

Financial Stability Board Meeting to Discuss Workplan for 2017 and 2018

On 6 October, the Financial Stability Board (“FSB”) Plenary met to discuss its workplan for the remainder of 2017 and for 2018. Among other things, the participants discussed: (i) plans to evaluate the effects of the G20 reforms on financial intermediation; (ii) “progress of the annual reviews” of global systemically important banks (“G-SIBs”) and global systemically important insurers (“G-SIIs”); (iii) cybersecurity; (iv) “addressing misconduct risk”; (v) “market-based finance” matters, including “the annual global shadow banking monitoring exercise” and “the operationalisation by the International Organization of Securities Commissions . . . of relevant FSB policy recommendations to address structural vulnerabilities from asset management activities” (the FSB “approved the operational arrangements to initiate data collection and aggregation of global securities financing transactions, beginning with end-2018 data,” for which detailed reporting guidelines will be published later this year); and (vi) internal FSB governance matters, including “a review of the FSB’s processes, procedural guidelines, and transparency.”


EuVECA and EuSEF - Council of the EU Approves Amending Regulation

On 9 October, the Council of the EU adopted the final text of Regulation 2016/0221(COD), amending the regulations on European venture capital funds (No 345/2013) and European social entrepreneurship funds (No 346/2013). According to a 9 October press release, the European Parliament approved the new rules on 14 September 2017, which aim to “diversify the funding sources available for businesses and long-term projects in Europe . . . by making it easier for them to raise money on capital markets.” The amending Regulation will enter into force on the twentieth day following its publication in the Official Journal and will apply three months following the date of its entry into force.

Securities Financing Transactions Regulation – European Commission Publishes Report on Securities Financing Transactions

On 19 October, the European Commission published a report on the “progress in international efforts to mitigate the risks associated with [securities financing transactions (“SFTs”)], including the FSB recommendations for haircuts on non-centrally cleared SFTs, and on the appropriateness of those recommendations for Union markets” as required by the EU’s Securities Financing Transactions Regulation 2015/2365 (“SFTR”). The Commission concluded that: “to a large extent, the FSB recommendations on SFTs have been addressed in the EU through the adoption of SFTR and specific provisions in sectoral financial services legislation and guidelines. As such, there does not seem to be a need for further regulatory action at this stage.” The Commission also noted that it “will continue to thoroughly monitor developments in SFT markets and the international regulatory space” and to “reassess the added value of qualitative standards and haircut floors on the basis of a report to be prepared by ESMA once comprehensive SFT data is available.”

AIFMD and UCITS V – ESMA Updates Q&As on AIFMD and UCITS V

On 5 October, ESMA updated its Q&As on the application of the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”) and the Undertakings for Collective Investment in Transferable Securities Directive (2014/91/EU) (“UCITS V”).

  • The topics updated in the Q&As on the application of the AIFMD include: (i) the application of “remuneration-related disclosure requirements under Article 22(2)(e) of the AIFMD to the staff of the delegate of an AIFM to whom portfolio management or risk management activities have been delegated”; (ii) the disclosure of “information mentioned under Article 22(2)(e) and (f) of the AIFMD in the annual report”; and (iii) data to be reported under Article 13 of the SFTR “on the use . . . of SFTs and total return swaps in annual and half-yearly reports.”
  • The Q&As on the application of the UCITS V were updated to address issues regarding data to be reported under Article 13 of the SFTR “on the use . . . of SFTs and total return swaps in annual and half-yearly reports.”


EIOPA submits First Set of Advice to the European Commission on the Review of Specific Items in the Solvency II Delegated Regulation

On 30 October, EIOPA submitted to the European Commission its first set of advice to the Commission on the review of specific items in the Solvency II Delegated Regulation. The document provides recommendations and comments  related to topics including: (i) “Simplified calculations,” in which EIOPA calls for simplifications for many Solvency Capital Requirement (“SCR”) standard formula calculations, including those related to mortality risk and lapse risk; (ii) “Reducing reliance on external credit ratings in the standard formula,” in which EIOPA recommends introducing “two new simplified calculations . . . for the spread risk sub-module and for the market risk concentration risk sub-module”; (iii) “Treatment of guarantees, exposure guaranteed by a third-party and exposures to regional governments and local authorities” (“RGLA”), in which EIOPA endorses, in the market risk module, treating direct guarantees issued by RGLA listed in Commission Implementing Regulation (EU)2015/2011 “the same as the treatment of guarantees issued by the Member States’ central government of the jurisdiction in which they are established”; (iv) “Risk-mitigation techniques,” in which EIOPA provides a number of recommendations for rolling hedges, realistic recovery plans, and adverse development covers (a type of retrospective reinsurance plan); (v) “Look-through approach: investment related vehicles,” in which EIOPA recommends that the “application of the look-through approach . . . be extended to ‘investment related undertakings’” and that such application “be mandatory, regardless whether it is likely to determine a lower SCR”; (vi) “Undertaking specific parameters,” in which EIOPA supports “a new standardised method for the calculation of the adjustment factor for non-proportional reinsurance” and calls for this method “to be applied in the case of stop-loss treaties”; and (vii) “Loss-absorbing capacity of deferred taxes,” in which EIOPA reports the results of an analysis conducted on varying methods currently applied by European Economic Area jurisdictions to calculate reductions in capital requirements due to a deferred tax adjustment. According to EIOPA’s press release, EIOPA plans to submit its second set of advice to the European Commission by February 2018, and this second set “will focus on the analysis of items such as the cost of capital in the calculation of the risk margin and the calculation of non-life and life underwriting risks, catastrophe risks, unrated debt and unlisted equity.”

EIOPA Publishes Work Programme for 2018

On 28 September, EIOPA published its work programme for 2018. As explained by EIOPA’s news update, the programme “highlight[s] and specif[ies] the activities and tasks of the [EIOPA] for the coming year, within the framework of a multiannual work programme 2017-2019.” Strategic objectives identified as part of the work programme for 2018 include to: (i) “strengthen the protection of consumers”; (ii) “improve the functioning of the EU internal market in the field of pensions and insurance”; (iii) “strengthen the financial stability of the insurance and occupational pensions sectors”; and (iv) establish “EIOPA to be a responsible, competent and professional organisation.”

Insurance Distribution Directive

On 16 October, the European Parliament’s Committee on Economic and Monetary Affairs (“ECON”) asked the European Commission to assess whether the application date of the Insurance Distribution Directive (2016/97/EU) (“IDD”) can be extended from 23 February 2018 to 1 October 2018.

On 11 October, EIOPA published its final report on guidelines for insurance-based investment products (“IBIPs”) that “incorporate a structure which makes it difficult for the customer to understand the risks involved.” The report outlines eight guidelines related to: (i) “requirements that apply to contracts which only provide investment exposure to financial instruments deemed non-complex under MiFID II (Article 30(3)(a)(i) of the IDD)”; and (ii) “requirements that apply to ‘other non-complex insurance-based investment products’ (Article 30(3)(a)(ii) of the IDD).”

EIOPA Chairman Gabriel Bernardino Delivers Statement on EIOPA’s Achievements, Future Trends, and Challenges and Opportunities

On 9 October, EIOPA Chairman Gabriel Bernardino delivered a statement to the ECON on EIOPA’s achievements and future trends, as well as challenges and opportunities and how EIOPA can address them. Chairman Bernardino’s statement addressed topics covering: (i) “enhancing supervisory convergence”; (ii) “reinforcing consumer protection”; and (iii) “maintaining financial stability.” With respect to future trends, challenges, and opportunities, Chairman Bernardino: (i) argued that “bolder steps are needed to further enhance financial integration and the completion of the Capital Markets Union”; (ii) explained that “EIOPA welcomes the Commission’s proposal to reform the EU’s supervisory architecture”; (iii) “welcomed the [Commission’s] proposal to include sustainability as well as technological innovation . . . in EIOPA’s mandate”; (iv) argued that EIOPA’s regulatory authority “should be strengthened with a mandate to act more intrusively when it detects signals of risks of cross-border failures”; and (v) advocated that “EIOPA’s role with regards to supervisory independence and conflict of interests should also be strengthened.”

Solvency II – EIOPA Publishes Q&As on Solvency II

On 19 October, EIOPA published two new sets of Q&As related to Solvency II (2009/138/EC).

  • EIOPA published Q&As on Commission Implementing Regulation (EU) No 2015-2452 “with regard to the procedures, formats and templates of the solvency and financial condition report”; and
  • EIOPA published Q&As on Commission Delegated Regulation (EU) 2015/35 supplementing Solvency II, which, among other topics, addressed issues related to reinsurance and capital requirements.

IAIS Publishes Tables Showing Status of the Insurance Core Principles and ComFrame

On 23 October, the IAIS published two tables “showing the status” of the Insurance Core Principles and the Common Framework for the Supervision of Internationally Active Insurance Groups, which the IAIS deems to be a “set of international supervisory requirements focusing on the effective group-wide supervision of internationally active insurance groups.” The IAIS indicated that it will update these documents on a quarterly basis. 


MiFID II – ESMA Publishes Guidelines on the Management Body of Market Operators and Data Reporting Service Providers

On 29 September, ESMA published guidelines on the “management body of market operators and data reporting services providers” under the Markets in Financial Instruments Directive (2014/65/EU) (“MiFID II”). The guidelines aim to: (i) “develop common standards to be taken into consideration by market operators and data reporting services providers when appointing new and assessing current members of the management body”; and (ii) provide guidance on how information should be recorded by market operators and data reporting services providers in order to make it available to the competent authorities for the exercise of their supervisory duties.” Along with the guidelines, ESMA published a final report that sets forth a feedback statement to its consultation paper. The guidelines will apply from 3 January 2018.

MiFID II – European Commission Vice President Valdis Dombrovskis States MiFID II Implementation Will Not be Delayed

On 17 October, Reuters UK reported that European Commission Vice President Valdis Dombrovskis, speaking at ESMA’s 2017 Conference in Paris, told the audience that “the deadline for MiFID II was already extended once, so we do not plan further extension of the deadline.” MiFID II will enter into force on 3 January 2018.

MiFID II – European Commission Publishes FAQs on Third Country Broker-Dealers’ Provision of Research and Execution Services

On 25 October, the European Commission published FAQs on the “application of MiFID II on third country broker-dealers’ provision of research and execution services to European Union, . . . investment firms that provide portfolio management or other investment or ancillary services in the EU, . . . and the MiFID II Portfolio Managers’ third country sub-advisors that are contractually obliged to comply with MiFID II”. The FAQs address whether a MiFID II Portfolio Manager or its Third Country Sub-Advisor may combine: “(i) a payment for research; and (ii) a payment for execution services into a single commission to a third country broker-dealer.” The FAQs state: “Based on the current practice of national competent authorities, a third country broker-dealer may receive combined payments for research and execution as a single commission when providing such services to a MiFID II Portfolio Manager or its Third Country Sub-Advisor, as long as the payment attributable to research can be identified.” The FAQs also address whether “third country broker-dealers [are] required to identify a separate charge for research in cases where a MiFID II Portfolio Manager or its Third Country Sub-Advisor pays for these services out of” a RPA or its own resources. The FAQs state: “[W]here research is paid for by means of a RPA or directly out of the MiFID II Portfolio Manager’s or its Third Country Sub-Advisor’s own resources – the MiFID II Portfolio Manager/Third Country Sub-Advisor is responsible for ensuring compliance with the requirements of Article 13. The Commission explained that its “FAQ represents the view of the Commission and does not prejudice further decision by the Court of Justice of the European Union.”

MiFIR – ESMA Publishes Final Draft RTS on Trading Obligations for Derivatives

On 29 September, ESMA published its final draft regulatory technical standards (“RTS”) implementing the trading obligations for derivatives (for classes of interest rate swaps (“IRS”) and credit default swaps (“CDS”)), under the Markets in Financial Instruments Regulation (EU) 600/2014 (“MiFIR”). According to the press release, “ESMA has decided to make the following fixed-to-float IRS and CDS indices subject to on-venue trading”: (i) fixed-to-float interest rate swaps denominated in EUR; (ii) fixed-to-float interest rate swaps denominated in USD; (iii) fixed-to-float interest rate swaps denominated in GBP; and (iv) index CDS – iTraxx Europe Main and iTraxx Europe Crossover. ESMA explained that it has submitted its draft RTS to the European Commission for endorsement and 3 January 2018 remains the date of application.

MiFID II/MiFIR – ESMA Publishes Nine Opinions on Position Limits Regarding Commodity Derivatives

On 24 October, ESMA published nine opinions on position limits regarding commodity derivatives under MiFID II/MiFIR. The position limits relate to contracts on: (i) London cocoa; (ii) Robusta coffee; (iii) white sugar; (iv) aluminum; (v) copper; (vi) lead; (vii) nickel; (viii) tin; and (ix) zinc. As noted in the press release, ESMA also published “a list of liquid contracts that will receive a bespoke position limit” and “will continue to assess the notifications received and issue opinions in order to ensure that the position limits are set in accordance with the MiFID II framework.”

MiFID II/MiFIR and Market Abuse Regulation – ESMA Launches Second Phase of the Financial Instruments Reference Data System

On 18 October, ESMA launched the second phase of its Financial Instrument Reference Database (“FIRDS”). As part of the launch, ESMA provided instructions on how market participants can access “the database containing the currently available reference data that will eventually enable market participants to identify instruments subject to the [Market Abuse Regulation] and MiFID II/MiFIR reference data reporting requirements.” ESMA explained that the instructions “will allow market participants to prepare their reporting systems” ahead of the 3 January 2018 implementation date for MiFID II/MiFIR.

EMIR – The Council of the EU Publishes Presidency Compromise on Proposed Regulation Amending EMIR

On 28 September, the Council of the EU published a Presidency compromise proposal (COD/2017/0090) on a proposed regulation amending European Market Infrastructure Regulation (“EMIR”) (648/2012/EU) regarding “the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivatives contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories.” Changes from the original European Commission legislative text relate to a number of issues, including: (i) conditions under which clearing members or clients “are permitted to restrict access to [clearing] services to control the risks connected to the clearing services offered”; and (ii) reporting obligations for derivatives contracts where one or both of the counterparties is a UCITS or AIF.

EMIR – European Commission and ECB Releases and Recommendations on CCPs

On 13 October, the European Commission published a consolidated version (dated 20 September 2017) of its proposed Regulation (COM(2017) 331) (dated 13 June 2017) amending EMIR and Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (ESMA) regarding “the procedures and authorities involved for the authorisation of [CCPs] and requirements for the recognition of third-country CCPs.” This version incorporates a new paragraph “a” to Article 44b of EMIR regarding “tasks and powers of the CCP Executive Session.”

On 4 October, the ECB published an opinion on the European Commission’s proposed Regulation (COM(2017) 331) amending EMIR and Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (ESMA) regarding “the procedures and authorities involved for the authorisation of [CCPs] and requirements for the recognition of third-country CCPs.” Generally, the European Central Bank (“ECB”) “strongly supports the initiative set out in the Commission’s proposal to enhance the role of the relevant members of the [European System of Central Banks] . . . in the process for the supervision of Union CCPs and the recognition of third country CCPs,” but proposed a few amendments to the European Commission’s proposed Regulation.

On 3 October, the European Commission published an opinion (C(2017) 6810) supporting the ECB’s Recommendation (ECB/2017/18), issued on 22 June 2017, to “amend[] Article 22 of Protocol No 4 on the Statute of the European System of Central Banks and of the European Central Bank” to clarify and grant authority to the “ECB to regulate ‘clearing systems for financial instruments’ for monetary policy purposes,” including central counterparties (“CCPs”). The Commission notes that “this would enable the ECB to perform fully the responsibilities being granted to the central banks of issue under the . . . [Commission’s] proposal as concerns clearing systems for financial instruments denominated in euro.” According to the press release, the Commission also supports limited amendments to the ECB’s recommendation “to underline the need for consistency with the regulatory powers between the ECB, the European Parliament, the Council and the Commission with regard to clearing systems,” which is published in an annex of the opinion. The European Parliament and the Council will now “consider for adoption the proposed changes to the ECB statute under the ordinary legislative procedure, thanks to a simplified procedure under Article 129(3) of the Treaty on the Functioning of the European Union,” as the press release explains.

EMIR – ECB Publishes Opinion on Proposed Regulation Amending EMIR Regarding the Clearing Obligation

On 11 October, the ECB published an opinion (CON/2017/42) on a proposed regulation amending EMIR regarding “the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivatives contracts not cleared by a central counterparty, [and] the registration and supervision of trade repositories and the requirements for trade repositories.” The ECB stated that it “generally supports the Commission’s initiative to introduce a number of targeted modifications to [EMIR] with a view to simplifying the applicable rules and eliminating disproportionate burdens,” and proposed a few amendments to the Commission’s proposed regulation.

ESMA Publishes Overview of EU Derivative Market Size

On 19 October, ESMA published an article providing “first-time data on the EU interest rate, credit, equity, commodity and foreign exchange derivatives markets, based on weekly available EMIR data” aggregated from the six trade repositories authorized in the EU. Specifically, the article: (i) measures “the size of the different derivative markets, both in terms of number of transactions and gross notional amount outstanding”; (ii) calculates “market participants’ market concentration”; (iii) “shows the shares of derivative transactions that occur within the [European Economic Area], as opposed to cross-border transactions with non-EEA counterparts”; and (vi) shows the “breakdown between over-the-counter and exchange-traded derivatives.”

Benchmarks Regulation

On 29 September and 3 October, the European Commission published four Delegated Regulations supplementing the Benchmarks Regulation (EU) 2016/1011.

  • Commission Delegated Regulation (C(2017) 6464) “specifying how the nominal amount of financial instruments other than derivatives, the notional amount of derivatives and the net asset value of investment funds are to be assessed.”
  • Commission Delegated Regulation (C(2017) 6469) “specifying how the criteria of Article 20(1)(c)(iii) [of the Benchmark Regulation] are to be applied for assessing whether certain events would result in significant and adverse impacts on market integrity, financial stability, consumers, the real economy or the financing of households and businesses in one or more Member States.”
  • Commission Delegated Regulation (C(2017) 6474) “specifying technical elements of the definitions laid down in paragraph 1 of Article 3 of the [Benchmark] Regulation.”
  • Commission Delegated Regulation (C(2017) 6537) “with regard to the establishment of the conditions to assess the impact resulting from the cessation of or change to existing benchmarks.”

On 29 September, ESMA published a consultation paper on draft guidelines on non-significant benchmarks. ESMA is seeking comments related to “the [four] areas for which the Benchmarks Regulation suggests ESMA to develop Guidelines for nonsignificant benchmarks, namely: (i) procedures, characteristics and positioning of oversight function, (ii) appropriateness and verifiability of input data, (iii) transparency of methodology, (iv) governance and control requirements for supervised contributors.” The consultation period closes on 30 November 2017.

Benchmarks – FSB Publishes Progress Report on Reforming Major Interest Rate Benchmarks

On 10 October, the FSB published a progress report on the “implementation of the FSB’s 2014 recommendations to reform major interest rate benchmarks such as key interbank offered rates (“IBORs”).” The report concludes that: (i) the “administrators for the three major interest reference rates” – the Euro Interbank Offered Rate (“EURIBOR”), the London Interbank Offered Rate (“LIBOR”) and the Tokyo Interbank Offered Rate (“TIBOR”) – “have commenced a variety of measures to test and improve the robustness of their respective IBOR methodologies,” although the “underlying reference transactions in some currency-tenor combinations, [such as LIBOR and EUROBOR,] are scarce, and submissions therefore necessarily remain based on a confluence of factors including transactions, and expert judgement”; (ii) the FSB Official Sector Steering Group (“OSSG”) members have “made good progress in supporting the work streams focused on identifying new or existing [risk-free rates (“RFRs”)] that could be used in place of IBORs in a range of contracts,” but have made “[l]imited progress . . . to date on migration from the major IBORs to these RFRs, even where they are available”; and (iii) the ISDA, “which has established a series of working groups to tackle the topic of contractual robustness to the risk of permanent discontinuance of widely-used interest rate benchmarks,” has made progress in its effort to “draft robust fall back arrangements for new contracts referencing IBORs and a future protocol to amend existing contracts referencing IBORs to include those fall back arrangements.” The FSB stated that it will “continue to monitor progress in reforms to interest rate benchmarks, and will prepare a progress report for publication in 2018.”

IOSCO Publishes Report on Other Credit Rating Agency Products

On 11 October, the International Organization of Securities Commissions (“IOSCO”) published a final report on other Credit Rating Agency (“CRA”) products (“OCPs”) aimed at providing “market participants with a better understanding of certain non-traditional products and services offered by credit rating agencies.” As the press release explains, the final report “describes six groups of OCPs and their current status, as well as business practices and trends within the CRA industry.” As noted in the press release, the report concludes that “the legal and/or corporate organizational structures chosen by CRAs to engage in an activity or offer a service or product are not indicative of whether they are subject to the Code of Conduct,” and advocates that OCPs “be responsive to the spirit of the four high level objectives set forth in the IOSCO Principles Regarding the Activities of Credit Rating Agencies”: (i) “the quality and integrity of the rating process”; (ii) “independence and conflicts of Interest”; (iii) “transparency and timeliness of ratings disclosure”; and (iv) “confidential information.”

FSB Publishes Consultation on Unique Product Identifier Governance

On 3 October, the FSB published a consultation document on proposed arrangements for the unique product identifier (“UPI”). The consultation is seeking comments related to the “key criteria preliminarily identified by the FSB for selecting, and the key functions to be undertaken by, future UPI Governance Arrangements.” The consultation period closes on 17 November 2017. The FSB indicated that it intends to publish further consultation on UPI governance in early 2018.


 MiFID II/MiFIR - ESMA Publishes New Q&As on Post-Trading Topics

On 10 October, ESMA published new Q&As on MiFID II/MiFIR post trading topics. The Q&As contain one Q&A addressing pre-trade checks waiver regarding “straight through processing” under Article 29 of MiFIR and Article 2 of RTS.

MiFID II/MiFIR – ESMA Updates Q&As on Investment Protection, Market Structure, and Transparency

On 3 October, ESMA updated its Q&As on investment protection and intermediaries, market structure, and transparency topics under MiFID II/MiFIR. The press releases are available here and here.

  • The topics updated in the Q&As on investment protection and intermediaries include: (i) best execution; (ii) “recording of telephone conversations and electronic communications”; (iii) “post-sale reporting”; (iv) “information on costs and changes”; and (v) “client categorisation.”
  • The topics updated in the Q&As on market structure include: (i) “direct electronic access and algorithmic trading”; (ii) “the tick size regime”; and (iii) “multilateral and bilateral systems.”
  • The topics updated in the Q&As on transparency include: (i) “general Q&As on transparency topics”; (ii) “non-equity transparency”; (iii) “the double volume cap mechanism”; and (iv) “the systematic internaliser regime.”

MiFID II/MiFIR – ESMA Publishes FAQs on Interim Transparency Calculations

On 18 October, ESMA published FAQs on interim transparency calculations for all non-equity instruments with regards to the implementation of MiFID II/MiFIR. The FAQs cover: (i) general information related to the transitional transparency calculations (“TTCs”); (ii) data availability; and (iii) file structure of TTCs.

EMIR and CSDR – ESMA Updates Q&As on EMIR and the CSDR

On 2 October, ESMA updated its Q&As on EMIR and the Central Securities Depository Regulation (909/2014/EU) (“CSDR”).

  • The topics updated in the Q&As on EMIR include: (i) “definition of OTC Derivatives”; and (ii) “ongoing monitoring of collateral requirements.”
  • The topics updated in the Q&As on CSDR include: (i) “protection of securities of participants and those of their clients”; (ii) “provisions of bank-type ancillary services”; and (iii) “requirements for [Central Securities Depository] links.”

Benchmarks Regulation – ESMA Updates Q&As on Benchmarks Regulation

On 29 September, ESMA updated its Q&As on the Benchmarks Regulation to include four new Q&As regarding: (i) the “application of the BMR to EU and third country central banks”; (ii) the “exemption on single reference price”; (iii) the definition of “family of benchmarks”; and (iv) the definition of “use of a benchmark.”

Market Abuse Regulation – EMSA Updates Q&As on Market Abuse Regulation

On 29 September, ESMA updated its Q&As on the Market Abuse Regulation (596/2014/EU) (“MAR”). The updated Q&As include a new Q&A regarding how issuers should deal with a “situation where an issuer has delayed a disclosure of inside information in accordance with Article 17(4) of MAR and, due to subsequent circumstances, that information loses the element of price sensitivity and therefore its inside nature.”

Prospectus Regulation – ESMA Updates Q&As on Prospectus Regulation

On 20 October, ESMA updated its Q&As on the Prospectus Regulation (EU) 2017/1129 following the regulation becoming applicable on 20 July 2017. The update deletes Q&A 27 addressing “convertible or exchangeable securities” and amends four other Q&As: (i) Q&A 29 addressing “conversion or exchange of non-transferable securities and exemption from publishing a prospectus”; (ii) Q&A 31 addressing “exemption for admission to trading provided for in point (a) of the first subparagraph of Article 1(5) of Prospectus Regulation (EU) 2017/1129”; (iii) Q&A 32 addressing “exemptions from the obligation to publish a prospectus in Article 1(5) Prospectus Regulation (EU) 2017/1129 as stand-alone exemptions”; and (iv) Q&A 44 addressing “obligation to publish a prospectus for admission of securities to trading on a regulated market (Article 3(2) Directive).”

ESMA Updates Q&As on the Implementation of its Guidelines on the Alternative Performance Measures

On 30 October, ESMA issued updated Q&As on its guidelines regarding the alternative performance measures (“APMs”) included in prospectuses or regulated information. The updated Q&As include six new Q&As related to: (i) the definition of APMs; (ii) the “scope of the APM guidelines”; (iii) the “application of the scope exemption” of the APM guidelines; (iv) the “definition and basis of calculation” for the “’Organic Growth’ of an issuer’s total revenues”; (v) whether the APM guidelines “require a numeric reconciliation of the APM to “’the most reconcilable line item, total or subtotal’ presented in the financial statements” or whether “a qualitative explanation of the items which adjust the financial statement’s figures” is sufficient; and (vi) whether “APMs representing a biased measure of performance,” even if correctly labeled, violate the APM guidelines.


  • 2-3 November: IAIS 24th annual conference.
  • 7 November: Council of the EU’s Economic and Financial Affairs Council Meeting.
  • 14 November: European Commission consultation on the roadmap for the fitness check of supervisory reporting requirements closes.
  • 15 November: European Commission consultation on post-trade in a Capital Market Union: dismantling barriers and strategy for the future closes.
  • 17 November: European Commission consultation on the review of the ESAs closes.
  • 17 November: Financial Stability Board consultation on unique product identifier governance arrangements closes.
  • 26 November: Legal Entity Identifier Regulatory Oversight Committee consultation on fund relationships in the global Legal Entity Identifier system closes.
  • 30 November: ESMA consultation of guidelines for non-significant benchmarks closes.
Ianthe Zabel
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