European Securities and Markets Authority Issues Public Statements on No-Deal Brexit Preparations
10/07/2019The European Securities and Markets Authority has issued four public statements on its preparations for a no-deal Brexit in the event the U.K. fails to agree a deal with the EU or extend the Brexit deadline before October 31, 2019. In its public statement on preparations for a possible no-deal Brexit, ESMA notes that it had already put in place no-deal contingency plans ahead of the U.K.’s previous Brexit deadline extension on April 10, 2019. However, certain of its contingency measures now require updating. ESMA has issued separate statements on each of the following areas, including the actions market participants may need to take in response to its plans:
- Use of U.K. data: U.K. data is currently used in ESMA’s databases and Markets in Financial Instruments Directive II calculations. If a no-deal Brexit occurs on October 31, 2019, this data may no longer be available as of November 1, 2019. ESMA sets out how it will manage this in the case of its Financial Instruments Data Reference System, FITRS Transparency System, Double Volume Cap System, transaction reporting systems and registers. Actions include performing maintenance on its systems and adjusting the contents of its registers and data to remove U.K. records. Market participants should be conscious of the effect that ESMA’s actions will have on their systems but should broadly continue reporting data in the same way.
- Impact on MiFID II and the Benchmarks Regulation: Under MiFID II, certain types of derivatives contracts will not constitute financial instruments provided they satisfy certain conditions. Following Brexit, ESMA notes that certain contracts will no longer satisfy the relevant conditions. Trading venues established in the U.K. will also no longer be considered EU trading venues, which will consequently affect the treatment of transactions conducted on them under the Markets in Financial Instruments Regulation. ESMA has issued opinions on the treatment of third-country trading venues in the context of MiFID II/MiFIR and will use these to assess U.K. trading venues in a no-deal Brexit scenario. ESMA’s statement also clarifies the treatment of U.K. benchmark administrators under the BMR following a no-deal Brexit, indicating their new status as third country administrators and confirming the continued use of their benchmarks by EU supervised entities during the BMR transitional period.
- Operational plans for ESMA databases and IT systems: In the event the U.K. Financial Conduct Authority ceases to send data to ESMA and to have access to ESMA’s IT applications from November 1, 2019, ESMA will establish a series of measures to ensure that its data calculations are accurate. These measures include a freezing of the quarterly calculations for systematic internaliser-determination for equity instruments and bonds, the quarterly determination of the liquidity status of bonds and the monthly double volume cap publications for two months following Brexit.
View ESMA's Public Statement on no-deal Brexit preparations.
View ESMA's Data Operational Plan for a no-deal Brexit.
View ESMA's Public Statement on the impact of a no-deal Brexit on the application of MiFID II and the BMR.
View ESMA's Public Statement on the impact of Brexit on ESMA databases and performance of MiFID II calculations.
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