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Financial Regulatory Developments Focus
  • European Securities and Markets Authority Outlines 2018 Plans for EU Supervisory Convergence
    The European Securities and Markets Authority has published its Supervisory Convergence Work Programme for 2018. It highlights a total of five key priorities for its work on supervisory convergence in 2018, comprised of three ongoing priorities (application of the revised Markets in Financial Instruments framework, data quality and investor protection) and two new priorities (Brexit and financial innovation).

    In addition to the key priorities, the 2018 programme also sets out ESMA key objectives and main planned outputs in relation to a number of thematic and cross-cutting issues, including: investor protection and intermediaries; secondary markets; investment management; market integrity (including market abuse and benchmarks); post-trading (including CCPs, securities financing and settlement); corporate finance (in particular the new prospectus regime); corporate reporting; market data; financial innovation; IT infrastructure; and peer reviews.

    The supervisory convergence priorities ESMA is conducting ongoing work on are as follows:

    (i)         Ensuring that MiFID II/MiFIR are applied in a sound, efficient and consistent manner across the EU - ESMA proposes to develop or review, where appropriate, Q&A on market structure and transparency issues (including on the systematic internaliser regime and on the concept of multilateral systems), on MiFID II conduct of business and organisational requirements and on common interpretation and application of MiFID II commodity derivatives-related requirements (such as position limits, position reporting or the concept of "ancillary activity"). ESMA also proposes to issue Opinions on pre-trade transparency waivers (in particular the finalization of ESMA Opinions for non-equity waivers), on position limits for commodity derivatives and on the temporary suspension of transparency by national regulators. ESMA may also revise its 2017 Opinion on the concept of "Traded on a Trading Venue". ESMA's convergence work on MiFID II/MiFIR will include the assessment of third-country trading venues for the purpose of post-trade transparency requirements and the position limits regime.

    (ii)        Improving data quality to ensure efficient reporting - ESMA will continue its work on clarification and coordination of national regulators' efforts in respect of the reporting obligations under various requirements set by EU legislation, in particular under MiFID II/MiFIR, the European Market Infrastructure Regulation and the Money Market Funds Regulation.

    (iii)       Investor protection – ESMA will continue work on measures in relation to its new product intervention powers under MiFID II/MiFIR, which will empower ESMA to restrict the marketing, distribution or sale of certain financial products or to intervene in relation to certain financial activities. This planned work includes issuing an Opinion in relation to national product intervention measures.  ESMA also plans new or revised guidelines and/or Q&A on various MiFID II investor protection and intermediaries topics, such as the suitability obligations. It may also develop workstreams according to the outcome of the European Commission's proposals in relation to cross-border distribution of investment funds.

    The two new priorities highlighted by ESMA for 2018 are:

    (iv)       Brexit – ESMA highlights throughout its 2018 programme the need to enhance supervisory convergence in the context of the UK's withdrawal from the EU. A key focus of ESMA's supervisory convergence work is fostering a common supervisory approach to relocation of UK-based entities to the EU, in particular issues around outsourcing and delegation. ESMA also highlights that, subject to progress made in the UK-EU negotiations, it may need to conduct work on co-operation arrangements between the UK and the EU and/or ESMA.
    (v)        Financial innovation – ESMA proposes to conduct analysis of emerging and existing instruments (such as virtual currencies), platforms (such as Initial Coin Offerings) and technology (including tools such as distributed ledger technology). ESMA proposes a range of outputs throughout 2018, including analysis of RegTech test cases, a FinTech licensing mapping exercise and an analysis of the ICO market.  If the need arises, ESMA will also make updates to its DLT Report and/or MiFIR Product Intervention Supervisory Briefing.

    View ESMA's Supervisory Convergence Work Programme 2018.