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EU Regulatory Research

EU Regulatory Research

EU Regulatory Update


European Commission Launches Consultation on Supervisory Reporting Requirements

On 1 December, the European Commission released a consultation document launching a fitness check of supervisory reporting requirements. The consultation follows responses to a 2015 Call for Evidence that, as the Commission states, indicated that respondents were concerned about “overlaps and inconsistencies between reporting requirements . . ., a reportedly excessive number of requirements, . . . [and] insufficient clarity as to what needs to be reported and an insufficient use of standards . . . result[ing] in excessive compliance costs and complexity.” The Commission also states that “supervisors and regulators suggested that supervisory reporting requirements do not produce data of sufficient quality to allow them to fulfil their mandates.” The public consultation aims to: (i) “collect concrete quantitative evidence on . . . costs incurred to meet the [existing EU level] supervisory reporting requirements”; (ii) “gather specific examples of inconsistent, redundant or duplicative supervisory reporting requirements”; and (iii) seek “feedback on ways in which supervisory reporting could be simplified and streamlined in the future.” The consultation period closes on 28 February 2018.

Surveys on Incentives to Centrally Clear OTC Derivatives Trades

On 14 December, the FSB, the Basel Committee on Banking Supervision (“BCBS”), the Committee on Payments and Market Infrastructures (“CPMI”) and the International Organization of Securities Commissions (“IOSCO”) launched a number of surveys as part of their “joint work to review the effects on incentives to centrally clear over-the-counter (‘OTC’) derivatives trades following the implementation of the G20 regulatory reforms.” The surveys are “to be completed by different participants in central clearing, i.e. central counterparties, clearing members (as both OTC derivatives dealers and providers of client clearing services), and indirect clearers/end-users” and “cover areas such as the effects of G20 reforms on derivatives markets, client clearing service provision, and other market structure issues and observations.” The survey period closes on 26 January 2018.

Council of the EU Launches Online Register for Delegated Acts

On 12 December, the Council of the EU, together with the European Commission and the European Parliament, announced the launch of a new online register of delegated acts. In the press release, the Council of the EU explains that the “new interinstitutional register of delegated acts offers a complete overview of the lifecycle of this process [and] allows users to search and follow the development of delegated acts from the planning stage conducted by the European Commission, up until the final publication in the Official Journal. This “increases transparency of the decision-making process as it offers a one-stop-shop for delegated acts where all relevant information can be easily found.”


European Commission Adopts Delegated Resolution Supplementing ELTIF Regulation

On 4 December, the European Commission adopted a Delegated Regulation supplementing Regulation ((EU) 2015/760) on European long-term investment funds (“ELTIF”). The Delegated Regulation contains regulatory technical standards (“RTS”) specifying: (i) “the criteria for establishing the circumstances in which the use of financial derivative instruments solely serves hedging purposes under Article 9(3) of the ELTIF Regulation”; (ii) “the circumstances in which the life of an ELTIF is considered sufficient in length to cover the life-cycle of each of the individual assets of the ELTIF under Article 18(7) of the ELTIF Regulation”; (iii) “the criteria for an assessment of the market for potential buyers and a valuation of the assets to be divested under Article 21(3) of the ELTIF Regulation”; (iv) “common definitions, calculation methodologies and presentation formats . . . under Article 25(3) of the ELTIF Regulation”; and (v) “the types and characteristics of the facilities available to retail investors under Article 26(2) of the ELTIF Regulation.” The Delegated Regulation will enter into force on the twentieth day after its publication in the Official Journal, and will now be considered by the European Parliament and the Council.


FSB Publishes Consultation Document on a Methodology for Assessing the Implementation of its Key Attributes of Effective Resolution Regimes for Financial Institutions in the Insurance Sector

On 21 December, the Financial Stability Board (“FSB”) released a consultative document on a methodology for assessing the implementation of its Key Attributes of Effective Resolution Regimes for Financial Institutions (“Key Attributes) in the insurance sector, which outlines criteria for assessing the compliance of a jurisdiction’s insurance resolution frameworks with the FSB’s Key Attributes.  Among other topics, the FSB requested public comment on whether the proposed methodology: (i) is “adequately tailored to the specific features of resolution regimes that are needed to deal with insurers or insurance groups that could be systemically significant or critical if they fail”; and (ii) should provide specific guidance on how to “conduct an assessment for financial conglomerates that combine insurance business with banking and/or other non-insurance financial business.” The consultation period closes on 28 February 2018.

IAIS Publishes Report on the 2017 G-SII Identification Process

On 19 December, the International Association of Insurance Supervisors (“IAIS”) published a report detailing the process and methodology used to identify the global systemically important insurers (“G-SIIs”) for 2017. As noted in the report, the IAIS used the 2016 G-SII Assessment Methodology (“2016 Methodology”) to complete the 2017 G-SII Exercise “employing a five-phase approach” consisting of: (i) Phase I, which “is the data call conducted by the IAIS for insurers that met at least one of the criteria defined in paragraph 31 of the 2016 Methodology” (i.e., having “total assets of more than US $60 billion and a ratio of premiums from jurisdictions outside the home jurisdiction to total premiums of 5% or more” or “total assets of more than US $200 billion and a ratio of premiums from jurisdictions outside the home jurisdiction to total premiums greater than 0%”); (ii) Phase II, which “includes a rigorous quality assessment of the data acquired in Phase I, the calculation of the 17 Phase II indicators, and the determination of the quantitative threshold for inclusion in subsequent phases”; (iii) Phase III, which “complements the first two phases through the collection and analysis of additional quantitative or qualitative information that is not captured in the Phase II indicators”; (iv) Phase IV, which “enables Prospective G-SIIs to receive information regarding that insurer’s status through the first three phases and present additional information relating to any aspect of the 2016 Methodology”; and (v) Phase V, which “combines Phases I through IV to produce an overall assessment that concludes with the

IAIS’ recommendation to the FSB.” As part of its report, the IAIS released certain data elements and values used for the Phase II indicators and a description of the analysis undertaken in Phase III.

IAIS Publishes Consultation Paper on an Activities-based approach to Systemic Risk

On 8 December, IAIS published an interim consultation paper on its development of an activities-based approach (“ABA”) to the mitigation of systemic risk in the insurance sector. The paper: (i) provides “an overview of the IAIS’s prior work on assessing and mitigating potential systemic risk in the insurance sector”; (ii) “discusses the concept of an ABA and examines it relative to the IAIS’s existing entity-based approach (“EBA”) as well as work by other standard setters”; and (iii) describes the “key steps of [the ABA] approach, which include the identification of potentially systemic activities . . . in terms of the risk exposures associated with them [based on factors such as liquidity risk and macroeconomic exposure, including credit guarantees], the consideration of existing policy measures within the IAIS’s policy framework and the process for assessing the residual risks or supervisory aspects that may warrant additional policy measures.” The consultation period closes on 15 February 2018.

IAIS Issues Paper on Index-based Insurances Consultation

On 1 December, IAIS launched a public consultation on the draft Issues Paper on Index-Based Insurances. The paper focuses on insurances directed at risks from weather-related events and natural catastrophes. The Financial Inclusion Working Group prepared the paper to examine index based insurances, which “are seen as an attractive way to support the transfer of catastrophic event risks to capital markets.” The paper remarks that indexes themselves must be “well structured and functional” and noted that the “more broadly an index is applied to increase the potential number of covered clients, the more challenging it is to reduce the risk that the index will not be sufficiently responsive to reflect the circumstances of local clients.”

Solvency II

On 7 December, the Joint Committee of the European Supervisory Authorities (“ESAs”) – the European Banking Authority (“EBA”), the European Securities and Markets Authority (“ESMA”), and the European Insurance and Occupational Pensions Authority (“EIOPA”) – published two amended implementing technical standards (“ITS”) on mapping credit assessments of External Credit Assessment Institutions (“ECAIs”) for credit risk under the Solvency II Directive. According to the press release, the ITS are “part of the EU Single Rulebook for banking and insurance aimed at creating a safe and sound regulatory framework consistently applicable” across the EU. The ITS “aim at ensuring that only credit ratings used by ECAIs . . . can be used for calculating capital requirements of financial institutions and insurance undertakings.” The amendments reflect the recognition of five new credit rating agencies and the de-registration of one agency.

On December 7, the European Commission published a report to the European Parliament and the Council on the exercise of its power to adopt Delegated Acts conferred on the Commission pursuant to the Solvency II Directive (2009/138/EC). The report concluded that the Commission has “exercised its delegated powers in a timely and correct manner to ensure that the required Delegated Acts were in place for insurance and reinsurance undertakings and national supervisory authorities to apply the rules on the date [Solvency II] became fully applicable.”

Insurance Distribution Directive

On 20 December, the European Commission published a proposal for a directive (COM(2017) 792 final) to delay the application date of the Insurance Distribution Directive ((EU) 2016/97) (“IDD”) and a proposal for an amending Delegated Regulation (C(2017) 8681 final) to delay the application date of two IDD Delegated Regulations, (EU) 2017/2358 and (EU) 2017/2359, by seven months to 1 October 2018. As explained in the press release, the Commission proposed the delays because “it appears that some insurance distributors, especially smaller ones, are not yet fully ready for the new rules.” As noted in the press release, “Member States will still be required to transpose IDD into national law by the original date, 23 February 2018” and “the European Parliament and the Council will need to agree on the new application date in an accelerated legislative procedure.” The consultation period for the proposal closes on 16 February 2018.

EIOPA Publishes 2017 Financial Stability Report of the (Re)Insurance and Occupational Pensions Sectors in the European Economic Area

On 20 December, EIOPA published its 2017 financial stability report of the (re)insurance and occupational pensions sectors in the European Economic Area (“EEA”). According to the report, while “the global economic outlook continues to improve, many challenges remain for insurers.” These challenges include: (i) “the prolonged low interest rate environment,” which, according to a recent EIOPA survey, has led to number of “trends that could be associated with a search for yield behavior,” such as “increased exposure to more illiquid investments, such as non-listed equity, and to nontraditional asset classes, such as infrastructure”; (ii) “geopolitical events, environmental challenges and evolutions of financial markets” as sources of uncertainty; and (iii) the “high losses resulting from the active hurricane season 2017 [that] will undoubtably lead to lower technical results of many reinsurers and in some cases hinder the achievement of the profit guidance for 2017.” Despite these challenges, the report indicates that: (i) the insurance sector continues to be well capitalized with the solvency capital requirement ratio for the “median company above 200% and hence twice as much as the regulatory requirement”; and (ii) “total assets [for the European occupational pension fund sector] increased for the euro area in 2016 as did the average rate of return . . . with the overall active membership increased in the course of 2016 towards defined contribution schemes.”

EIOPA Publishes Opinion on Monetary Incentives and Remuneration Between Providers of Asset Management Services and Insurance Undertakings

On 11 December, EIOPA published an opinion addressing “insurance undertakings choosing underlying investment vehicles of unit-linked policies (‘underlying funds’) on the basis of those which provide the highest level of monetary incentives and remuneration to insurance undertakings.” As explained in the opinion, EIOPA is concerned about the occurrence of such activities and has “identified risks of consumer detriment relating to unmitigated conflicts of interest and to how insurance undertakings select and monitor the assets of unit-linked policies.” To address this issue, EIOPA recommends that national competent authorities (“NCAs”): (i) “emphasise to insurance undertakings that monetary incentives received from asset managers may be a source of conflicts of interest and that appropriate steps to prevent, identify, mitigate and manage the resulting conflicts of interest should be taken, considering the principles set out in the IDD”; (ii) “provide guidance to insurance undertakings on possible organisational or administrative arrangements to prevent conflicts of interest from adversely affecting the interests of policyholders, such as the rebating of monetary incentives received from asset managers to policyholders”; (iii) “provide guidance on measures to manage assets of unit-linked policies in the best interest of policyholders considering the principles set out in the IDD and Solvency II”; and (iv) “ensure that customers are provided with appropriate information on the nature and criteria used by insurance undertakings for the selection of underlying funds on offer.” Additionally, EIOPA requested that “within six months of the latest application date of any of the following legal acts” – the IDD, the PRIIPS Key Information Document Regulation, the Product Oversight and Governance Delegated Regulation (C(2017) 6218 final) or the Insurance-Based Investment Products Delegated Regulation (C(2017) 6229 final) – “NCAs . . . provide feedback on regulatory or supervisory actions taken on the basis of this Opinion and to report to EIOPA if and how domestic market practices have evolved.”

EIOPA Publishes Opinion on the Supervisory Assessment of Internal Models Including a Dynamic Volatility Adjustment

On 20 December, EIOPA published an opinion, dated 30 November 2017, on the “importance of common supervisory practices and approaches [regarding] the use of internal models” in the insurance industry, including the use of dynamic volatility adjustment (“DVA”) approaches. As explained in the opinion, “EIOPA is attentive to the convergence of supervisory practices on internal models and [insurance] undertakings’ compliance with the relevant requirements set out in the Solvency II Directive” and has “identified the DVA modelling as an area where supervisory convergence needs to be reinforced.” In response, EIOPA clarifies in its opinion that: (i) any deviations from the volatility adjustment (“VA”) methodology should be addressed in a way that the internal model produces a solvency capital requirements (“SCR”) “guarantying a level of policyholder protection that is at least as high as if replicating the EIOPA VA Methodology”; (ii) when using the DVA, “a holistic view should be taken in the supervisory assessment of modelling and risk-management aspects,” which means “on the one hand that all tests and standards on internal models apply and on the other hand that no undesirable risk management incentives should be allowed”; and (iii) “undertakings [must] provide the explanation of DVA methodology in the Solvency and Financial Condition Report” to satisfy the Solvency II disclosure requirements.

EIOPA Publishes Annual Reports on the Use of Exemptions and Limitations from the Regular Supervisory Reporting and on the Use of Capital Add-Ons by NCAs

On 21 December, EIOPA published its annual reports on the use of exemptions and limitations from regular supervisory reporting and on the use of capital add-ons by NCAs.

  • Use of Exemptions and Limitations: As explained in the report, “[NCAs] may exempt or limit the submission of the quantitative reporting templates by (re)insurance undertakings consistent with the Solvency II Directive.” The report aims to “present EIOPA’s conclusions regarding the analysis of the processes followed by each authority to grant limitations or exemptions from reporting.”
  • Capital Add-ons: As explained in the report, “[NCAs] have the possibility to set capital addons [to the solvency capital requirements] for a (re)insurance undertaking or for a group.” The report aims to provide an overview of the capital addons imposed by NCAs in 2016.

EIOPA Publishes Q&As on the Comprehension Alert in the Key Information Document for Insurance-Based Investment Products

On 19 December, EIOPA published a new Q&A on the comprehension alert in the KID for IBIPs under the PRIIPs Regulation. The Q&A addresses “which conditions should be used to determine whether a comprehension alert needs to be included in the [KID] for an [IBIP].”


MiFIR: Reference Data

On 20 December, ESMA published a statement granting temporary relief in the implementation of Legal Entity Identifiers (“LEI”) requirements under MiFIR. In the statement, ESMA notes that it has “received a number of indications that not all investment firms will succeed in obtaining LEI codes from all their clients that are legal persons ahead of 3 January 2018,” when MiFIR enters into force. As such, ESMA indicated that it will allow for a “temporary period of six months” during which: (i) “investment firms may provide a service triggering the obligation to submit a transaction report to the client, from which it did not previously obtain an LEI code, under the condition that before providing such service the investment firm obtains the necessary documentation from this client to apply for an LEI code on his behalf”; and (ii) “trading venues report their own LEI codes instead of LEI codes of the non-EU issuers while reaching out to the non-EU issuers.”

On 20 December, ESMA published two documents containing instructions on how to download and use files to be published by ESMA that will contain financial instrument reference data system (“FIRDS”) transparency calculation results and double volume cap system calculation results. 


On 15 December, ESMA published a revised opinion relating to third-country trading venues for post-trade transparency and a revised opinion relating to position limits under MiFID II and MiFIR. According to the press release, the revised opinions indicate that, “pending an ESMA assessment of more than 200 third-country trading venues under the criteria in the two opinions”: (i) “transactions on third-country trading venues do not need to be made post-trade transparent”; and (ii) “positions held in those third-country venue contracts are not considered to be economically equivalent over-the-counter contracts.” ESMA indicated that it will “carry out the determination of third-country trading venues and publish the results in the course of 2018.”

On 6 December, ESMA published the MiFID II/MiFIR transitional transparency calculations for equity and bond instruments. According to the statement of the Chair of ESMA Steve Maijoor, the publication “completes the provision of data needed, by financial market participants and their supervisors, for the implementation of one of the key elements of the MiFID/MiFIR reforms, more transparent securities markets.” In its press release, ESMA notes that it “has used the submitted data to provide the trading activity indicators required for the calculation of tick sizes for shares and depository receipts by trading venues and NCAs.” The transitional transparency calculations will, for all asset classes, be applicable from 3 January 2018 until the expiration of the current calculations (and then the next version of the calculations will be published). For equity instruments, the current calculations will apply until 31 March 2019, and for bond instruments, they will apply until 15 May 2018.

  • On 22 December, ESMA published an update to these MiFID II/MiFIR Transitional Transparency Calculations for equity and bond instruments. As noted in the press release, the “updated version mainly reflect [c]hanges in the classification of the instruments and the related parameters and resubmission of data by some trading venues” and is to be “used by market participants, infrastructures and authorities under the new regulatory framework from 3 January 2018.”

CRD IV/CRR and MiFID II/MiFIR: European Commission Adopts Proposal to Amend Existing Prudential Framework for Investment Firms

On 20 December, the European Commission adopted a proposal for a regulation (COM(2017) 790 final)

and a proposal for a directive (COM(2017)791 final). The proposed regulation would amend the Capital Requirements Directive (2013/36/EU) (“CRD IV”) and the Markets in Financial Instruments Directive (2014/65/EU) (“MiFID II”), while the proposed directive would amend the CRR, Regulation (EU) 1093/2010 (establishing a European Banking Authority), and MiFIR. According to the accompanying press release and FAQs, the new prudential regime would categorize investment firms into three classes, with each class “capturing different risk profiles.”

  • Class 1: Class 1 investment firms would “remain under the prudential regime of CRR/CRDIV” and be “supervised as significant credit institutions” subject to bank-like regulations. Class 1 investment firms would include those firms: (i) “with total assets above €30bn”; (ii) “which provide underwriting services”; and (iii) “dealing on own account[s],” defined as “trad[ing] in financial instruments against its own proprietary capital.”
  • Class 2: Class 2 investment firms would be subject to capital requirements either: (i) at “the level of initial capital required for their authorisation or a quarter of their fixed costs (overheads) for the previous year, whichever is higher”; or (ii) “according to the new K-factor approach for measuring their risks,” which “specifically target the services and business practices that are most likely to generate risks to the firm, to its customers and to counterparties [and] set capital requirements according to the volume of each activity,” whichever is higher. Class 2 investment firms would still be subject to select “provisions based on the CRR/CRDIV, including specific governance arrangements and rules on remuneration which are made to be better suited to the business models of investment firms.” Class 2 investment firms would include firms that exceed any of the following thresholds: (i) “assets under management under both discretionary portfolio management and non-discretionary (advisory) arrangements higher than €1.2[bn]”; (ii) “client orders handled of at least €100[m]/day for cash trades and/or at least € 1bn/day for derivatives”; (iii) “balance sheet total higher than €100m”; (iv) “total gross revenues higher than €30m”; (v) “exposure to risks from trading financial instruments higher than zero”; “client assets safeguarded and administered higher than zero”; or (vi) “client money held higher than zero.”
  • Class 3:  Class 3 investment firms would be subject to capital requirements either: (i) at “the level of initial capital required for their authorization”; or (ii) “a quarter of their fixed costs (overheads) for the previous year, whichever is higher.” For Class 2 investment firms, “the rules on governance and remuneration should focus on investor and consumer protection, as such firms do not pose significant risk to the financial stability.” Class 3 investment firms would include firms that do not exceed any of the thresholds listed for Class 2 investment firms.


On 21 December, ESMA published the results of its annual peer review regarding supervisory activities on CCPs’ default management procedures (“DMPs”) pursuant to the European Market Infrastructure Regulation ((EU)648/2012) (“EMIR”). According to the press release, ESMA found that “NCAs supervise DMPs adequately and that most EU CCPs have performed fire drills, [but found] areas where divergences emerged with respect to NCAs’ supervisory approaches related to reviewing and testing of DMP and fire drills.” Specifically, areas of divergence identified include: (i) “the supervision by NCAs of how CCPs manage their reliance on seconded traders, if used”; and (ii) some NCAs “physically attend CCP fire drills while other NCAs are not present.” Additionally, ESMA indicated that some NCAs “have not reviewed their CCPs’ DMPs nor confirmed that the latter have undertaken appropriate fire drills so that the NCAs review the corresponding performance as per their supervisory duties.” In response to these findings, ESMA recommends: (i) “NCAs should undertake regular comprehensive review of the CCPs’ DMPs”; and (ii) “CCPs . . . perform fire drills unannounced to some of the CCP staff to assess their readiness at all times.” Furthermore, ESMA identified “seven best practices from the responses provided by the NCAs, which NCAs are encouraged to consider implementing where appropriate.”

Prospectus Regulation – ESMA Launches Consultation on Draft RTS

On 15 December, ESMA launched a consultation on the draft RTS for the new Prospectus Regulation (EU) 2017/1129). ESMA is seeking feedback from parties impacted by the new regulation with regards to: (i) “key financial information for the prospectus summary”; (ii) “data for the classification of prospectuses and . . . ensur[ing] that such data is machine readable”; (iii) advertisements; (iv) and prospectus supplements. ESMA notes that it will submit final draft RTS to the European Commission on 21 July 2018. The consultation period closes on 9 March 2018.


Benchmarks Regulation – ESMA to Publish Register of Administrators and Third-Country Benchmarks

On 19 December, ESMA announced that it will “publish a register of administrators and third country benchmarks, in accordance with Article 36 of the Benchmarks Regulation . . . as of 3 January 2018.” In the press release, ESMA explains that until the “new register release is fully available as an IT functionality on our website, ESMA will provide an interim solution which involves it publishing, on a daily basis . . . the latest registers information in csv format.” The latest registers information can be found here.

CRA Regulation – ESMA Publishes Annual Market Share Calculation for EU Credit Rating Agencies

On 20 December, ESMA published its annual report on market share calculation for EU registered credit rating agencies (“CRAs”) as required by the CRA Regulation. As explained in the report, the “CRA Regulation requires issuers or related third parties, who intend to appoint two or more CRAs to rate an issuance or entity, to consider appointing at least one CRA with no more than 10% of the total market share in the EU.” To assist issuers or related third-parties in satisfying this requirement, ESMA publishes annually a report containing “a list of registered CRAs and the types of credit ratings they issue, together with a calculation of CRAs’ revenues from credit rating activities and ancillary services at group level.”

EBA Publishes Discussion Paper on EU Implementation of the Revised Market Risk and Counterparty Credit Risk Framework

On 18 December, the European Banking Authority (“EBA”) published a discussion paper on the implementation in the EU of the international revised market risk and counterparty credit risk frameworks, which consists of the Fundamental Review of the Trading Book (“FRTB”) and the Standardized Approach for Counterparty Credit Risk (“SA-CCR”). As explained by the EBA, the discussion paper “introduces some of the most important implementation issues in the area of counterparty credit risk and market risk,” including, for the SA-CCR: (i) “mapping of derivative transactions to risk categories”; and (ii) “corrections to supervisory delta.” With respect to the mapping of derivative transactions to risk categories, the EBA is proposing “a three-step approach for the designation of a derivative transaction to a risk category,” which includes: (i) first, a “qualitative approach [to] identify derivative transactions that have clearly one primary risk driver”; (ii) second, a “qualitative and quantitative approach [to provide a] more detailed assessment of those derivative transactions that are not immediately allocated through the first step”; and (iii) third, a “fallback approach, in case the assessment in the second step does not allow [the determination of] which of the risk drivers are material, [and which] would simply allocate the derivative transaction to all the risk categories corresponding to all the risk drivers (material or not) of the transaction.” With respect to the corrections to supervisory delta, the EBA is proposing “to allow the use of a λ shift in the context of the Black-Scholes formula to move the interest rate into positive territory [and] stakeholders’ feedback is particularly sought on how the λ parameter should be set.” The consultation period closes on 15 March 2018.

ESAs Publish Final Draft Technical Standards Amending Margin Requirements for Physically Settled Foreign Exchange Forwards

On 19 December, the ESAs published its final draft RTS “amending Delegated Regulation (EU) 2016/2251 supplementing Regulation (EU) No 648/2012 [(“EMIR”)] with regard to RTS on risk mitigation techniques for [over-the-counter] derivative contracts not cleared by a CCP with regard to physically settled foreign exchange forwards.” As explained in the final draft RTS, the ESAs “have been made aware of challenges for certain end-user counterparties” in satisfying the requirement to exchange variation margin due to the difference between the requirements contained in the RTS and “the adoption of the international standards in other jurisdictions via supervisory guidance.” In light of these challenges, the ESAs explained that they “have developed draft amendments to these RTS, which align the treatment of variation margin for physically settled [foreign exchange (‘FX’)] forwards with the supervisory guidance applicable in other key jurisdictions.” Specifically, the amendments would mandate that the “requirement to exchange variation margin for physically settled FX forwards should target only transactions between institutions (credit institutions and investment firms).” The ESAs noted that they “are aware that the amended RTS would most probably enter into force after 3 January 2018, when the requirement to exchange variation margin for physically settled FX forwards is due to enter into force.”

EMSA Published Final Draft RTS on the European Single Electronic Format

On 18 December, ESMA published its final draft RTS on the European Single Electronic Format (“ESEF”), as required by the Transparency Directive. As explained by the RTS, the new format will apply to “annual financial reports containing financial statements for financial years beginning on or after 1 January 2020.” According to the press release, ESMA also: (i) published a “reporting manual and detailed instructions to issuers to facilitate the implementation of the RTS”; and (ii) launched a new website on the ESEF.

Short Selling Regulation – ESMA Publishes Technical Advice on How to Improve the Short Selling Regulation

On 21 December, ESMA published its final report to the European Commission regarding technical advice on the evaluation of certain elements of the Short Selling Regulation ((EU/236/2012) (“SSR”). As noted in the press release, ESMA “proposes a number of concrete amendments on controversial areas of the SSR to improve its relevance, effectiveness, coherence, and efficiency,” including those relating to: (i) “exemption for market making activities”; (ii) “short-term bans on short-selling in case of a significant decline in prices”; and (iii) “transparency of net short positions and reporting requirements.”


MiFID II/MiFIR – ESMA Updates Q&As on Transparency

On 18 December, ESMA updated its Q&As on transparency topics related to MiFID II and MiFIR. The updated document includes six new Q&As regarding equity transparency, non-equity transparency, and pre-transparency waivers related to: (i) the “default transparency regime for equity instruments”; (ii) the “default liquidity status of bonds”; (iii) “the ‘nominal value’ of bonds”; (iv) the “categorisation of subscription rights”; (v) the “process for a waiver under Article 18(2) of MiFIR”; and (vi) the “reference price waiver and multi-listed shares.”

MiFID II/MiFIR – ESMA Updates Q&As on Market Structure

On 18 December, ESMA updated its Q&As on market structure topics related to MiFID II and MiFIR. The updated document includes three new Q&As regarding the “application of MiFID II after 3 January 2018, including issues of ‘late transposition” and one updated Q&A regarding whether the “minimum tick size regime under Article 49 of MiFID II appl[ies] to all orders for which a pre-trade transparency waiver can be granted in accordance with Article 4 of MiFIR.”

MiFID II/MiFIR – ESMA Updates Q&As on Investor Protection

On 18 December, ESMA updated its Q&As on investor protection topics related to MiFID II and MiFIR. The updated document includes ten new Q&As regarding: (i) suitability and appropriateness; (ii) inducements; (iii) “provision of investment services and activities by third country firms”; and (iv) “application of MiFID II after 3 January 2018 8, including issues of ‘late transposition.’”

MiFID II/MiFIR – ESMA Updates Q&As on Data Reporting

On 18 December, ESMA updated its Q&As on data reporting topics related to MiFID II and MiFIR. The updated document includes three new Q&As regarding: (i) “unknown date of admission”; (ii) the “concept of underlying”; and (iii) “non-EU branches of EU investment firms.”

MiFID II/MiFIR – ESMA Updates Q&As on Commodity Derivatives

On 15 December, ESMA updated its Q&As on commodity derivatives topics related to MiFID II and MiFIR. The updated document includes five new Q&As regarding position limits and position reporting related to: (i) “how the spot month [should] be defined for contracts where there are daily, weekly, quarterly and calendar as well as monthly variants of the same contract”; (ii) “where there is a chain of investment firms that have to comply with commodity position reporting obligations, who has to report to the trading venue or NCA”; (iii) “how . . . clients of investment firms [should] inform their intermediaries of the nature of each of their positions (hedge or speculation)”; (iv) “how . . . the position quantity field [should] be reported for contracts that relate to delivery of the same underlying over different periods of time”; and (v) “how . . . the position in the spot month and other months [should] be reported for contracts where there are daily or weekly as well as monthly contracts.”

MiFID II/MiFIR – ESMA Updates Q&As on Post-Trading

On 14 December, ESMA updated its Q&As on post trading topics related to MiFID II and MiFIR. The updated document includes one new Q&A regarding segregation level for indirect clearing accounts.

EMIR – ESMA Updates Q&As on the implementation of EMIR

On 14 December, ESMA updated its Q&As on the implementation of EMIR. The updated document includes three new Q&As regarding indirect clearing, reporting of collateral, and reporting to trade repositories related to: (i) “in the event of a clearing member default, [whether it is] permissible for a CCP to liquidate all of the collateral recorded in all the gross omnibus indirect client accounts (referred to in paragraph 2(b)) together and apply the resulting sum collectively in order to cover losses or to enable the netting of positions across different accounts”; (ii) how certain information on collateral should be reported to trade repositories; and (iii) certain details of Article 3a of the ITS on reporting to trade repositories, where “the counterparty that pays the spread shall be identified as the buyer and the counterparty that receives the spread shall be identified as the seller,” and an updated Q&A regarding contracts with no maturity date.

CSDR - ESMA Updates Q&As on the implementation of the CSDR

On 14 December, ESMA updated its Q&As on the implementation of the Central Securities Depository Regulation ((EU)/909/2014) (“CSDR”). The updated document includes two new Q&As regarding general organizational requirements and record keeping relating to: (i) whether it is mandatory for there to be “a direct contractual relationship between a CSD and a member of a user committee of a securities settlement system operated by that CSD”; and (ii) “what entities should be covered for the purpose of the records a CSD has to keep in relation to settlement banks as referred to in Article 54(2)(l) and Article 55(2)(g), (l) and (m) of the RTS on CSD Requirements.”

Benchmarks Regulation - ESMA Updates Q&As on the implementation of the Benchmarks Regulation

On 14 December, ESMA updated its Q&As on the implementation of the Benchmarks Regulation. The updated document includes two updated Q&As regarding requirements for administrators and written plans relating to: (i) whether “EU index providers [are] required to comply with the obligations laid down in the BMR before they are authorised or registered”; and (ii) whether “supervised entities, other than administrators, [are] required to have robust written plans for cessation or material changes of a benchmark and to reflect them in the contractual relationship with clients as of 1 January 2018.”


  • 5 January 2018: EIOPA consultation on the second set of advice to the European Commission on specific items in the Solvency II Delegated Regulation close.
  • 15 January 2018: ESMA consultation on proposed guidelines on the calculation of derivatives positons by trade repositories under EMIR closes.
  • 15 January 2018: IAIS consultation on ICP 8 and additional ComFrame material integrated with ICP 8 closes.
  • 22 January 2018: European Commission consultation on institutional investors and asset managers' duties regarding sustainability closes.
  • 26 January 2018:  FSB-BCBS-CPMI-IOSCO survey on the effects on incentives to centrally clear over-the-counter (OTC) derivatives trades closes.
  • 31 January 2018: IAIS consultation on ICP 15 and 16, additional ComFrame material integrated with ICP 15 and 16, and the proposed definitions of ERM-related terms closes.
  • 16 February 2018: European Commission proposal to delay the application date of the Insurance Distribution Directive by seven months to 1 October 2018 closes.


Ianthe Zabel
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