The European Securities and Markets Authority (ESMA) published on 7th of February, seven opinions on position limits, regarding commodity derivatives under MiFID II/MiFIR.The opinions agree with the proposed position limits regarding:
In addition, ESMA published two more opinions on the proposed position limits regarding the OMIP SPEL Base contracts. The first opinion relates to the position limits initially notified by Comissão do Mercado de Valores Mobiliários (CMVM ) which ESMA did not find consistent with the objectives established in MiFID II.
The European Banking Authority (EBA) issued a new benchmarking report on diversity practices in credit institutions and investment firms, analysing the development since its 2015 diversity benchmarking exercise. Based on data as of September 2018, still many institutions, 41.61% out of 834, have not adopted a diversity policy. The representation of women in management bodies is still relatively low and many institutions do not have a gender diverse board. The EBA calls on institutions and Member States to consider additional measures for promoting a more balanced representation of both genders and on competent authorities to ensure institutions’ compliance with the requirement to adopt diversity policies.
The European Banking Authority calls on institutions and Member States to consider additional measures for promoting a more balanced representation of both genders and on competent authorities to ensure institutions’ compliance with the requirement to adopt diversity policies.
On the 3 February 2020 the FCA published a Dear CEO Letter on their approach to customers who have been in persistent debt for over 36 months (PD36).
The FCA have conducted a review with which they came to areas of concern. This milestone is addressed to credit card borrowers and tells them to check their approach to ensure it is reducing persistent debt while treating their customers fairly.
It is important that firms are operationally ready to deliver their PD36 interventions in line with the regulatory requirements. Operational readiness should include consideration of the people, processes (including all communications) and systems impacts and requirements to deliver competent customer engagements.
This consultation paper is primarily of interest to competent authorities and firms that are subject to MiFID II and MiFIR – in particular, investment firms and credit institutions performing investment services and activities.
The CP introduces new requirements for trading venues as well as for Systematic Internalisers (SIs) and investment firms trading OTC. MiFID II/MiFIR will expand their reach to include equity-like and non-equity instruments.
National competent authorities (NCAs) may waive some of the pre-trade transparency obligations for trading venues, the European Commission reserves the right to review and adjust these requirements two years after they have come into force.
Syllabus of this consultation paper are:
ESMA is therefore asking firms if the share trading obligation in Article 23 of MiFIR should be reduced to exclude third-country shares and if so, what is the best way to identify such shares.
The deadline for comments on the consultation paper is 17 March 2020. ESMA intends to submit its final report of the transparency regime applicable to equity instruments to the European Commission by July 2020.
The European Securities and Markets Authority (ESMA) has published on 4 Feb 2020 a Final Report on draft regulatory technical standards (RTS) on postponing the date of entry into force of the Commission Delegated Regulation (EU) 2018/1229 (RTS on settlement discipline) to 1 February 2021.
The current date for the new regime to enter into force is 13 September 2020. The new regime under the Central Securities Depositories Regulation will introduce new changes that will require significant IT system infrastructure, market testing and adjustments to legal arrangements between the parties concerned. The new regime affects a wide range of market participants and authorities,
ESMA is proposing to delay the entry into force of the RTS on settlement discipline, having taken into account the additional time needed for the establishment of essential features for the functioning of the settlement discipline regime, such as the necessary ISO messages, the joint penalty mechanism of CSDs that use a common settlement infrastructure, and the need for proper testing of the new functionalities. Annex IV to the final report contains the draft Commission Delegated Regulation, which has been submitted for endorsement by the European Commission.
The CSD Regulation (CSDR) settlement discipline regime consists of three main features:
The European Commission asked ESMA to report on its progress with the product intervention, including the practical effects of the product intervention measures in relation to Contracts for Difference (CFDs) and binary options.
ESMA published its first product intervention measures back in March 2018 and justified that these measures have protected retail investors by limiting distribution of speculative products to retail clients. Nearly all NCAs have taken national product intervention measures in relation to the marketing, distribution or sale of binary options and CFDs to retail clients.
As part of its review, and process of renewal, of the temporary measures in relation to binary options and CFDs, ESMA has collected significant information on the impact of its product intervention measures. ESMA also invited market participants, investors and their associations to share any further information on the effects of the measures.
The most important points of the technical advice include:
The Joint Money Laundering Steering Group (JMLSG) published on the 4 February 2020, proposed amendments to its Guidance. The proposed revisions take account of The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 which came into force on 10th January 2020, and reflect some refinement of the Guidance to improve clarity of other minor issues.
A new section is being introduced in Part II in order to provide sector specific guidance for cryptoasset exchanges and custodian wallet providers. JMLSG will publish the aforementioned shortly.
On 9 July 2018, Directive (EU) 2018/843 entered into force and amended the Directive (EU) 2015/849. This directive introduces a number of changes that warrant a review of the Risk Factor Guidelines to ensure their ongoing accuracy and relevance: this is the case in particular in relation to the provisions on enhanced customer due diligence (EDD) related to high-risk third countries.
To support firms’ AML/CTF compliance efforts and enhance the ability of the EU’s financial sector effectively to deter and detect ML/TF, these guidelines have been updated regarding:
The guidelines are divided into two parts:
Together, Title I and Title II promote the development of a common understanding, by firms and competent authorities across the EU, of what the risk-based approach to AML/CTF entails and how it should be applied.
The European Banking Authority (EBA) published a consultation on 12 February 2020 on draft Guidelines on the appropriate subsets of sectoral exposures to which competent or designated authorities may apply a systemic risk buffer (SyRB) in accordance with the Capital Requirements Directive (CRD). These Guidelines aim at setting a common framework to harmonise the design of the appropriate subsets of sectoral exposures to which a systemic risk buffer may be applied, thus facilitating a common approach throughout the EU. The consultation will run until 12 May 2020.
This consultation paper (CP) is setting pre-defined frame, which competent authorities should use when defining a subset of sectoral exposures in the application of a systemic risk buffer. A pre-condition when defining a subset of sectoral exposures is its systemic relevance according to a qualitative and quantitative assessment conducted by the relevant authority. The CP recommends three criteria to be used in such assessments: size, riskiness and interconnection.
This consultation paper sets out general principles to ensure the right balance between addressing the systemic risk, stemming from the identified subset of sectoral exposures and the unintended consequences when applying a sectoral SyRB to this subset. In particular, relevant authorities should avoid unwarranted interactions with other macroprudential measures and consider reciprocity challenges that could arise when identifying an appropriate subset of sectoral exposures.
Comments to this consultation can be sent to the EBA, the deadline is 12 May 2020. All contributions received will be published following the close of the consultation, unless requested otherwise.
On 12 February 2020, the International Organization of Securities Commissions (IOSCO) published a final report on issues, risks and regulatory considerations relating to crypto-asset trading platforms (CTPs).
The key considerations relate to:
IOSCO states that many of the issues related to the regulation of CTPs are common to traditional securities trading venues but may be heightened by the business models used by CTPs. Additionally, where a regulatory authority has determined a crypto-asset is a security and falls within its remit, the basic principles or objectives of securities regulation should apply.
IOSCO will continue to monitor the evolution of the markets for crypto-assets to ensure the issues, risks and key considerations identified in this report remain relevant and appropriate.
On 13 February 2020, the FCA published a letter with which they laid out the key risks credit brokers could pose to their consumers or markets. Credit brokers are now asked to consider the extent of these risks in their business and assess if their strategies reduce the risks.
The FCA explains that it has examined a range of information and data, including firms’ regulatory histories and the type and number of complaints, to assess how credit brokers could cause harm. The FCA set out what it found:
The FCA advised it prioritised the supervisory work in the area of accurate regulatory data. It reminds firms that are subject to the rules in SUP 16.10 that they must review and confirm their details annually, within 60 business days of their accounting reference date. Even if a firm’s details have not changed from the previous year, it will still need to log on to Connect and confirm that they are up to date. Firms are recommended to register for the ‘Regulation Round Up’, which is the FCA’s monthly newsletter to all regulated firms. Firms are also advised to understand the customer journey and staff/AR (appointed representatives) oversight, in order to prevent the risk of mis-selling.
The UK left the EU with a Withdrawal Agreement on 31 January 2020 and entered a transition period. The regulator expects companies to take notice of the areas of concerns, they are advised to take steps and prepare for after the transition period, which ends on 31 December 2020. Should firms have questions or are unsure, they could reach out to the regulator for assistance.
On 18 February 2020 the Financial Conduct Authority published its Sector Views. It gives an overview of how each financial sector is performing. The View also provides annual analysis of the way the financial environment is changing and the impact of these changes on consumers and market effectiveness. This analysis will contribute to the Business Plan 2020/21 and the decisions that have been made, affecting consumers, market integrity and competition.
The sector views on general insurance and protection identifies the following risks:
The country’s watchdog is known for its fintech-friendly and innovative approach, which is reflected in this report.
ICMA’s European Repo and Collateral Council published its guide on 24 February 2020 to reporting repo transactions, under the EU Securities Financing Transactions Regulation (SFTR). The purpose of this guide is to support ICMA members in their SFTR implementation efforts. It offers help to interpret the SFTR regulatory reporting framework, specified by the European Securities and Markets Authority and sets out best practice recommendations to provide additional clarity to the official guidance. It is supplemented by a set of sample reports and an overview of repo life-cycle event reporting, which have been published alongside the guide.
The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (MLRs 2019) require the UK regulated sector to apply enhanced customer due diligence in relation to high-risk countries.
The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (MLRs 2019) require the UK regulated sector to apply enhanced customer due diligence in relation to high-risk countries in order to prevent activities related to money laundering and terrorist financing.
On 21 February 2020 FATF published two statements identifying jurisdictions with strategic deficiencies in their AML/CTF regimes.
Annex A of the updated HMT advisory notice identified the following as high risk jurisdictions with significant strategic deficiencies in their AML/CTF regimes: Democratic People’s Republic of Korea and Iran.
Annex B of the HMT advisory notice identified the following jurisdictions that are under increased monitoring which are actively working with the FATF to address strategic deficiencies in their AML/CTF regimes: Albania, Bahamas, Barbados, Botswana, Cambodia, Ghana, Iceland, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen, Zimbabwe.
Trinidad and Tobago has made significant progress in improving its AML/CTF regime it is no longer subject to increased monitoring by the FATF.
ISDA published, on 26 February 2020, an EMIR reporting industry best practices, which cover 87 data points across 61 reporting fields, including both over-the-counter and exchange-traded derivatives, and were developed to improve the accuracy and efficiency of trade reporting and to reduce compliance costs.