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The following posts provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.

  • EMIR Refit: EU Clarification on Derivatives Trading and Clearing Obligations
    07/12/2019

    The European Securities and Markets Authority has issued a Statement clarifying the application and interaction of the EU derivatives clearing and trading obligations following the entry into force of the revised European Market Infrastructure Regulation, known as EMIR Refit.

    EMIR Refit has, subject to limited exceptions, applied directly across the EU since June 17, 2019. EMIR Refit amended the definition of a Financial Counterparty, bringing central securities depositories authorized under the EU Central Securities Depositories Regulation within scope and categorizing all Alternative Investment Funds as FCs (or, for non-EU funds, as third-country entities equivalent to FCs). It also introduced a clearing threshold for FCs, meaning that small FCs are exempt from the clearing obligation. In addition, Non-Financial Counterparties that meet the clearing threshold no longer must clear all derivatives that they enter that are subject to the clearing obligation, but only those derivatives in the asset class for which they have exceeded the threshold.

    Read more.
    TOPICS: DerivativesMiFID II
  • UK Regulator Publishes Rules Restricting Sale of Contracts for Difference and Related Options
    07/01/2019

    The U.K. Financial Conduct Authority has published the Conduct of Business (Contracts for Difference) Instrument 2019, implementing product intervention measures designed to restrict the sale, marketing and distribution of contracts for difference and contract for difference-like options to retail consumers. The rules will affect: (i) retail clients who invest, or may invest, in CFDs and CFD-like options; (ii) investment firms caught by the provisions of the Markets in Financial Instruments Directive (including those caught by the Capital Requirements Directive, where appropriate) that are involved in marketing, distributing or selling CFDs and CFD-like options in, or from, the U.K. to retail clients; and (iii) U.K. branches of third-country investment firms that are involved in marketing, distributing or selling CFDs or CFD-like options to retail clients.

    Read more.
  • EU to Lift Temporary Ban on the Sale of Binary Options to Retail Clients in Wake of National Measures
    07/01/2019

    The European Securities and Markets Authority has ended its temporary prohibition on the marketing, distribution or sale of binary options to retail clients. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU.

    Read more.
  • Basel Committee on Banking Supervision Publishes Revisions to Leverage Ratio Requirements
    06/26/2019

    The Basel Committee on Banking Supervision has published revisions to its standards for leverage ratio capital requirements. The revisions relate to: (i) calculations of leverage ratios for "client-cleared" derivatives; and (ii) disclosure requirements for leverage ratios.

    Read more.
  • US and UK Regulators Issue Joint Statement on Credit Derivatives Markets
    06/24/2019

    The U.S. Commodity Futures Trading Commission, U.S. Securities and Exchange Commission and the U.K. Financial Conduct Authority have issued a joint statement regarding the use of "opportunistic strategies" in the credit derivatives markets, including but not limited to so-called "manufactured credit events." The agencies expressed concern that the use of such strategies could adversely affect the integrity and confidence of these markets, as well as markets more generally, due to issues related to securities, derivatives conduct and antifraud laws, along with public policy concerns.

    Read more.
    TOPIC: Derivatives
  • European Commission Publishes Commission Delegated Regulation Extending Exemption from EU Transparency Requirements to the People's Bank of China
    06/20/2019

    An amending Commission Delegated Regulation to the existing Commission Delegated Regulation (Regulation 2017/1799), which specifies that third-country central banks may be exempted from certain transparency requirements under the Markets in Financial Infrastructure Regulation, has been published in the Official Journal of the European Union. The amendment means that the People's Bank of China will be added to the list of counterparty institutions whose transactions will not be subject to trade transparency requirements under MiFIR to the extent that those transactions are in pursuit of monetary, foreign exchange or financial stability policy. The amending Delegated Regulation will come into force and apply directly across the EU from July 10, 2019.
     
    View the amending Commission Delegated Regulation.
     
    View Commission Delegated Regulation 2017/1799.
  • Basel Committee on Banking Supervision Discusses Supervisory Initiatives and Approves Implementation Reports
    06/20/2019

    Central bankers and banking supervisors of the Basel Committee on Banking Supervision met this week to discuss a range of policy and supervisory initiatives. 

    Read more.
  • UK Secondary Legislation Published to Implement Changes under EMIR REFIT
    06/17/2019

    The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019 have been made and will come into force on July 9, 2019.

    Read more.
  • European Securities and Markets Authority Postpones Review of Transparency Requirements under MiFIR
    06/17/2019

    The European Securities and Markets Authority has postponed its review of the operation of transparency requirements laid out under Regulatory Technical Standards issued under the Markets in Financial Instruments Regulation. MiFIR's transparency regime obliges those providing investment services in the EU to disclose details of their transactions in bonds, structured finance products, emission allowances and derivatives both prior to, and following, trades. The detail of how participants should comply with this transparency regime is set out in the related delegated acts and technical standards published under MiFIR. Under the MiFIR RTS, ESMA is obliged to submit a report on the operation of thresholds for the liquidity and trade percentiles of certain financial instruments by July 30 each year. However, given the continuing uncertainties over Brexit, ESMA considers it would be inappropriate to perform the review by the usual deadline, particularly as the results of its review may lead to a tightening of the relevant rules. No new deadline for performing the review has yet been established.

    View ESMA's letter.

    View the transparency RTS.
  • European Securities and Markets Authority Chair Queries EMIR REFIT Clearing Threshold Calculation for Certain Financial Counterparties
    06/07/2019

    The Chair of the European Securities and Markets Authority, Steven Maijoor, has requested clarity from the European Commission on the methodology for calculating the clearing threshold of a Financial Counterparty that is part of a non-financial group under the revised European Market Infrastructure Regulation (known as EMIR REFIT).

    Read more.
  • UK Regulator Publishes Policy Statement on Supervisory and Enforcement Process for Securitization Repositories, including post-Brexit
    06/06/2019

    The U.K. Financial Conduct Authority has published a Policy Statement setting out the final rules governing the FCA's authority to impose sanctions on persons for breaching requirements imposed under the U.K. Securitization Regulations 2018, which implements the EU Securitization Regulation. The Policy Statement also includes proposals on how the FCA will apply its existing supervisory and enforcement processes to securitization repositories (the bodies responsible for collecting and maintaining records of securitizations) after the U.K.'s exit from the EU.

    Read more.
  • US Commodity Futures Trading Commission Provides Margin Relief for Legacy Swaps
    06/06/2019

    In response to a request from the International Swaps and Derivatives Association, the Commodity Futures Trading Commission's Division of Swap Dealer and Intermediary Oversight issued no-action relief that will permit swap dealers to make certain amendments to so-called "legacy swaps" without such swaps losing their legacy status for purposes of the CFTC's uncleared swap margin rule. Legacy swaps are exempt from the CFTC's uncleared swap margin rule because they were entered into prior to the relevant compliance date for that rule. The relief provides clarity that certain amendments to legacy swaps will not bring them within scope of the rule.

    The relief will permit swap dealers to continue to treat the following as legacy swaps:
    • legacy swaps that are amended in an immaterial manner (defined as amendments that would not affect the economic obligations of the parties or the valuation of the swap);
    • a swap resulting from the exercise of a swaption that is itself a legacy swap;
    • the remaining portion of a swap following a partial termination of such legacy swap;
    • the remaining portion of a swap following a partial novation of such legacy swap; and
    • new swaps resulting from a multilateral compression exercise consisting solely of legacy swaps.

    View the No-Action letter.
    TOPIC: Derivatives
  • EONIA Methodology and One-Off Spread Confirmed
    05/31/2019

    The European Money Markets Institute has adopted the EONIA working group's proposed methodology for calculating EONIA's replacement rate. The new methodology, dubbed "€STR" (or the "Euro short term rate"), will take effect as of October 2, 2019. In line with the adoption of the €STR, the European Central Bank has calculated the average risk spread between the new €STR and the existing EONIA rate as 0.0085% (8.5 basis points). The spread will be used for a limited period to calculate an adjusted EONIA rate for all existing contracts which continue to reference EONIA following the introduction of the €STR in October 2019.

    Read more.
  • European Securities and Markets Authority Consults on EMIR 2.2 Technical Advice
    05/28/2019

    The European Securities and Markets Authority has launched consultations on proposed technical advice on third-country CCP tiering, comparable compliance and fees under draft revisions to the European Market Infrastructure Regulation, known as EMIR 2.2. EMIR 2.2 will change the requirements for the supervision of both EU and third-country CCPs, and includes the controversial formal EU "location policy" for CCPs. The text of EMIR 2.2 was agreed between the European Parliament, the Council of the European Union and the European Commission on March 13, 2019, but has not yet been published in the Official Journal of the European Union. However, the European Commission requested technical advice from ESMA on May 3, 2019 and ESMA has begun that preparatory work. The consultations close on July 29, 2019. ESMA intends to submit its final reports and technical advice to the European Commission in Q3 and Q4 2019.

    Read more.
  • EMIR Refit Regulation Published
    05/28/2019

    The Regulation amending the European Market Infrastructure Regulation, known as EMIR Refit or EMIR 2.1, has been published in the Official Journal of the European Union.

    The EMIR Refit amendments aim to introduce a simplified and more proportionate approach to certain aspects of EMIR as part of the EU's broader "Regulatory Fitness and Performance Program".

    Read more.
  • European Banking Authority Publishes Draft Implementing Technical Standards For Supervisory Reporting under the Capital Requirements Regulation
    05/28/2019

    The European Banking Authority has published draft Implementing Technical Standards for supervisory reporting, which make changes to the existing reporting obligations of EU banks (credit institutions) and investment firms. The majority of the technical standards will apply from March 2020, with the exception of the liquidity coverage requirements, which will apply from April 2020.

    Read more.
  • Financial Stability Board Assesses Legal Entity Identifier Implementation
    05/28/2019

    The Financial Stability Board has published a thematic review on the implementation of the Legal Entity Identifier. An LEI is a unique identifier of entities that engage in financial transactions. It is intended that such an identifier will be held by all legal entities participating in financial markets across the globe. It is envisaged that the LEI system will lead to better data aggregation, enhance systemic risk monitoring and reduce costs to market participants. The thematic review provides a summary assessment of the successes of the LEI, sets out steps that are still needed to fully achieve the G20's objectives and makes recommendations, addressed to the FSB, other international bodies (such as the International Organization of Securities Commissions and Basel Committee on Banking Standards), FSB member jurisdictions, the LEI Regulatory Oversight Committee and Global LEI Foundation, to tackle the issues that are preventing wider adoption of the LEI.

    View the report.
  • Proposed EU Guidelines for Reporting of Securities Financing Transactions
    05/27/2019

    The European Securities and Markets Authority has published a consultation paper proposing guidelines for reporting of securities financing transactions under the Securities Financing Transactions Regulation. SFTs involve the use of securities to borrow cash or other higher investment-grade securities, or vice versa. Such transactions can include repurchase transactions, securities lending and sell/buy backs. The SFTR requires, amongst other things, that all securities financing transactions be reported to EU recognized trade repositories. Such reports must include details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation will apply to financial and non-financial counterparties, subject to exceptions for central banks and similar bodies, and will be phased-in according to type of entity:
    • banks and investment firms from April 11, 2020;
    • CCPs and central securities depositories from July 11, 2020;
    • other Financial Counterparties from October 11, 2020; and
    • Non-Financial Counterparties from January 11, 2021.
    Read more.
  • EU Authority Asks for Feedback on the MiFID II Position Limits Regime for Commodity Derivatives
    05/24/2019

    The European Securities and Markets Authority has published a Call for Evidence on position limits and position management in commodity derivatives introduced by the revised Markets in Financial Instruments Directive. MiFID II requires the European Commission to report to the European Parliament and the Council on the impact of the application of position limits and position management on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets. ESMA has been asked to provide the Commission with advice regarding this new regime to support the Commission's preparation of the report.

    Read more.
    TOPICS: DerivativesMiFID II
  • International Swaps and Derivatives Association Consults Further on Fallbacks for the Cessation of Benchmarks
    05/16/2019

    The International Swaps and Derivatives Association has published two consultation papers on fallbacks for benchmarks. The first consultation paper concerns proposed amendments to ISDA's standard documentation to implement fallbacks based on alternative risk-free rates for certain key Interbank Offered Rates (USD LIBOR, Hong Kong's HIBOR, Canada's CDOR and Singapore's SOR), should the relevant IBOR be permanently discontinued. ISDA is intending to amend and restate the rate options in the 2006 ISDA Definitions to ensure that a fallback will apply to derivative transactions entered into on or after the effective date of the amendments and incorporate the 2006 ISDA Definitions. ISDA also intends to publish a protocol to help ensure inclusion of the fallbacks in pre-existing derivative transactions. This consultation follows ISDA's consultation last July on these changes for GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW. ISDA confirms that the feedback to that July 2018 consultation indicates that market participants prefer the "compounded setting in arrears rate" to address the difference in tenors, and the "historical mean/median approach" to address the difference in risk premia. Based on the feedback to both of these consultations, ISDA intends to implement fallbacks for the relevant benchmarks by the end of 2019.

    Read more.
  • EONIA Working Group Seeks Feedback on Implementation of Euro Risk-Free Rates
    05/15/2019

    The working group charged with implementing the European market's move away from EONIA, the current reference rate used in euro-denominated financial contracts, has published a consultation paper setting out its "Legal Action Plan" for transitioning to the chosen new euro short-term rate. The current consultation paper focuses on how the new rate should be incorporated into both new and existing financial contracts so as to ensure a swift and smooth transition from EONIA. The paper seeks feedback from market participants on its proposals. Responses should be sent by June 12, 2019.

    Read more.
  • European Banking Authority Launches Consultation on Technical Standards for Counterparty Credit Risk
    05/02/2019
    The European Banking Authority has launched a consultation on the Regulatory Technical Standards that it is developing to govern certain aspects of counterparty credit risk in derivatives transactions. The EBA has been mandated to produce the RTS under the current draft of the Capital Requirements Regulation 2. The consultation runs until August 2, 2019. A public hearing will also take place at the EBA premises in Paris on June 17, 2019 from 15:00 - 17:00 CET. Parties interested in attending should register by May 28, 2019.

    Read more.
  • EU Equivalence Decision for Japan for Uncleared Derivatives
    05/02/2019

    A Commission Implementing Decision declaring equivalence of the Japanese legal, supervisory and enforcement arrangements for risk mitigation techniques and exchange of collateral has been published in the Official Journal of the European Union. The European Market Infrastructure Regulation requires counterparties to uncleared derivatives to comply with requirements on timely confirmation, portfolio compression, procedures for reconciliation of disputes and the exchange of collateral, collectively known as the risk mitigation techniques. The European Commission is empowered to adopt an equivalence decision declaring that the requirements of a third country are equivalent to the EMIR requirements on risk mitigation. The USA has also benefited from such a decision in respect of its risk mitigation arrangements.

    Read more.
  • US Federal Reserve Proposes Broadened Application of US Netting Provisions
    05/02/2019

    The Board of Governors of the Federal Reserve System has proposed amendments to Regulation EE, which implements the netting provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991.  The proposed amendments would expand the definition of “financial institution” for purposes of the netting provisions to more clearly cover certain categories of entities and would clarify how the activities-based test under Regulation EE applies following the consolidation of legal entities.

    Read more.
  • Further Extension of the EU Contracts for Difference Product Intervention Measures
    04/30/2019

    The European Securities and Markets Authority has issued a Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients. This has now been published in the Official Journal of the European Union. ESMA announced on March 27, 2019, that the existing restriction would be extended on the same terms as the previously implemented temporary restrictions. The CfD Decision applies directly across the EU from May 1, 2019, for a period of three months.

    View the decision.
  • EU Legislation Extends the Clearing Obligation Exemption for Certain Intragroup Derivatives Transactions
    04/29/2019

    A Commission Delegated Regulation extending the exemption from the clearing obligation for intragroup transactions with a third-country group entity has been published in the Official Journal of the European Union. There are currently three sets of Regulatory Technical Standards made under the European Market Infrastructure Regulation that impose the clearing obligation for certain interest rate derivatives and credit derivatives. Each of these three RTS exempts from the clearing obligation certain intragroup derivatives transactions where one of the counterparties is a third-country group entity and there is no relevant equivalence decision in respect of the third country in which it is situated. An equivalence decision would enable parties that are subject to both the EU and a third country's clearing obligation to comply only with one jurisdiction's requirements, but no equivalence decisions have been made to date. Each of the three RTS sets a different expiry date for the intra-group exemption, which fall between December 21, 2018 and July 9, 2019.

    The Delegated Regulation, which is substantively the same as ESMA's final draft submitted to the European Commission in September 2018, amends each of the RTS by extending the exemption period to one unified expiry date of December 21, 2020. The Delegated Regulation enters into force on April 29, 2019 and is directly applicable across the EU.

    View the Delegated Regulation.
    TOPIC: Derivatives
  • UK Regulator Delays Final Product Intervention Measures on Contracts for Difference
    04/26/2019

    The Financial Conduct Authority has published a statement on the delay to publication of final rules for contracts for difference products and CfD-like options. The FCA has consulted on its proposals to make European Securities and Markets Authority's temporary product intervention measures permanent in the U.K. The FCA's proposed interventions are the same in substance as ESMA's, although it is also proposing to apply its rules to closely substitutable products and on extending these measures to exchange-traded derivatives. The consultation closed on February 7, 2019.

    Read more.
  • US Commodity Futures Trading Commission Issues No-Action Letters to Ensure Continued Relief and Substituted Compliance for U.K. Firms Post-Brexit
    04/05/2019

    The Commodity Futures Trading Commission has issued two no-action letters to ensure that existing regulatory relief and substituted compliance measures for EU firms will continue to apply to U.K. firms following the U.K.’s departure from the EU.  The CFTC said that the no-action letters will bring greater clarity to the market in light of Brexit and reflect the CFTC’s commitment to ensuring that Brexit will not create regulatory uncertainty in global derivatives markets.  The relief is intended to cover both “no-deal” and “soft” Brexit scenarios.  The relief would apply upon the departure of the U.K. (and would thus take effect at the end of the most recent extension of the departure date to October 31, 2019).

    CFTC Letter 19-08 extends to U.K. entities substituted compliance measures originally issued for EU entities.  These measures include comparability determinations for certain entity-level, transaction-level and uncleared margin requirements (the EU Comparability Determinations), along with an exemption for EU-authorized multilateral trading facilities and organised trading facilities from the CFTC’s swap execution facility registration requirements.

    Read more.
  • UK Financial Conduct Authority Implements Permanent Ban of Sale of Binary Options to Retail Consumers
    03/29/2019

    Following its recent consultation, the U.K. Financial Conduct Authority has published a Policy Statement, final rules and a Statement on the new product intervention measure it is introducing for retail binary options. Both contracts for difference and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by certain providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000 allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The FCA also consulted on product intervention rules for CfDs and those final rules are expected to be published in April this year.

    Read more.
  • EU Contracts for Difference Product Intervention Measures to be Extended
    03/27/2019

    The European Securities and Markets Authority has announced that its restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from May 1, 2019, for a further three months. The extension will be on the same terms as the existing product intervention measure.

    View ESMA's announcement.

    View details of the existing decision.
  • EU Product Intervention Measures for Binary Options Extended
    03/27/2019

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from April 2, 2019. This has now been published in the Official Journal of the European Union. ESMA announced in February this year that the existing restriction would be extended. The binary options Decision applies directly across the EU from April 2, 2019, for a period of three months.

    View the decision.

    View ESMA's notification.
  • US Regulators Offer Margin Relief for Legacy Swaps No Deal Brexit Scenario
    03/25/2019

    The Commodity Futures Trading Commission has unanimously approved an interim final rule that will allow swap dealers and major swap participants to, in the event of a no-deal Brexit scenario, transfer legacy swaps entered into before the compliance date of the CFTC's margin requirements for uncleared swaps to an affiliate without triggering such requirements. The CFTC's interim final rule is substantively identical to an interim final rule adopted by the U.S. Prudential Regulators, which provides the same relief for legacy swaps entered into before the compliance date of their margin requirements for uncleared swaps.

    Both interim final rules apply only to legacy swaps that are transferred solely for relocation purposes. They do not cover economic changes to legacy swaps, such as amendments that modify payment amount calculation methods, maturity date or notional amount of the uncleared swap.

    The interim final rules are each effective immediately upon their respective publication in the Federal Register, and the transfer relief will apply for a period of one year following the U.K.'s withdrawal from the EU in the event of a no deal Brexit.

    Read more.
  • EU Securities Financing Transaction Reporting Obligation Phased-In from April 2020
    03/22/2019

    A Commission Delegated Regulation and Commission Implementing Regulation setting out technical standards on the reporting of securities financing transactions have been published in the Official Journal of the European Union. These technical standards supplement the EU Securities Financing Transactions Regulation, which requires, amongst other things, all SFTs to be reported to EU-recognized trade repositories. Relevant reports must include details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation will apply to financial and non-financial counterparties, subject to exceptions for central banks and similar bodies. While various parts of the SFTR came into effect on January 12, 2016, the new reporting obligation is brought into force by these new technical standards.

    Read more.
  • European Commission Communication on Progress on Building the Capital Markets Union
    03/15/2019

    The European Commission has published its latest progress report on building of the Capital Markets Union. The CMU is an EU initiative which aims to deepen and further integrate the capital markets of Member States, further safeguard financial stability, strengthen the international role of the euro and diversify sources of finances for small and medium enterprises. The CMU aims to allow consumers to buy cheaper and better investment products, and enable financial services providers to scale up by offering services in other Member States.

    The progress report notes that the CMU is an important Single Market project that will give increased access to capital for both companies and citizens, especially in smaller countries. A well-developed CMU increases the EU’s attractiveness to foreign investment and complements the EU’s agenda of free and fair trade. Broadly, the Commission has delivered measures that it had committed to take forwards at the beginning of the mandate and put in place certain "building blocks" of the CMU. However, the report notes that it may take time for the impact of the Commission’s actions to be realized.

    Read more.
  • Further EU Clarification For Financial Services Firms in a No Deal Brexit
    03/07/2019

    The European Securities and Markets Authority has published a statement on its approach to certain provisions of the Markets in Financial Instruments package and the Benchmarks Regulation in the event of a no-deal Brexit.

    Read more.
  • International Bodies Issue Statement on Margin Requirements for Uncleared Derivatives
    03/05/2019

    The Basel Committee on Banking Supervision and the International Organization of Securities Commissions have published a joint statement on the final implementation of the margin requirements for derivatives not cleared through a CCP. In March 2015, the Basel Committee and IOSCO published a revised version of their policy framework for the exchange of margin for uncleared derivatives. The main revisions were to delay the phase-in period for the obligations relating to both initial margin and variation margin and were aimed at harmonizing the key principles across jurisdictions.

    Read more.
    TOPIC: Derivatives
  • Basel Committee on Banking Supervision Announces Forthcoming Statements on Various Issues of Concern
    02/28/2019

    On February 27-28th, the Basel Committee on Banking Supervision met to discuss policy and supervisory issues, and the extent to which members had implemented post-financial crisis reforms.

    The Committee noted the implementation status of margin requirements for uncleared derivatives and it will publish in March a joint statement with the International Organization of Securities Commissions on certain implementation aspects of margin requirements.

    Read more.
  • HM Treasury Publishes Guidance On Pension Scheme Arrangements and the EMIR Clearing Obligation In A No Deal Brexit Scenario
    02/21/2019

    HM Treasury has published guidance on the availability of the exemption from the clearing obligation for Pension Scheme Arrangements under the European Market Infrastructure Regulation in a post-Brexit no deal scenario. The U.K. government has been publishing statutory instruments (U.K. secondary legislation) onshoring and amending EU regulations for Brexit. This is being done under the European Union (Withdrawal) Act 2018, so as to ensure a workable U.K. statute book after Brexit. The U.K.'s onshoring legislation has been drafted so as to come into operation on exit day if there is a "no deal" scenario where the U.K. leaves the EU without a ratified withdrawal agreement. The onshoring legislation includes various statutory instruments to onshore the EU EMIR.

    Read more.
  • EU Product Intervention Measures for Binary Options to be Further Extended
    02/18/2019

    The European Securities and Markets Authority has announced that its prohibition on the marketing, distribution or sale of binary options to retail clients will be extended for a further three months from April 2, 2019. ESMA's ban has been in effect since July 2, 2018.

    View ESMA's announcement.

    View details of the existing product intervention measure for binary options.
  • EU to Recognize Three UK CCPs in a No-Deal Brexit Scenario
    02/18/2019

    The European Securities and Markets Authority has announced that in the event of a no-deal Brexit, it will recognize three U.K.-established CCPs for the purposes of providing services in the EU, namely - LCH Limited, ICE Clear Europe Limited and LME Clear Limited. ESMA has adopted recognition decisions for each of the U.K. CCPs, which will take effect on the day after the U.K. leaves the EU. This follows the European Commission's earlier determination of U.K. equivalence for CCPs.

    View ESMA's announcement.
  • EU Agrees Final EMIR Refit
    02/05/2019

    On February 5, 2019, the Council of the European Union and the European Parliament reached a preliminary agreement on the draft Regulation amending the European Market Infrastructure Regulation, known as EMIR Refit or EMIR 2.1. The final text is likely to be published in the Official Journal of the European Union in April or May this year. Subject to a few exceptions, the changes will apply directly in all EU member states 20 days from that publication date. There may be minor drafting changes as the text is vetted by technicians and translated prior to its publication, but the legal position should be unaffected by this.

    Read more.
  • EU Contracts for Difference Product Intervention Measures Extended Again
    01/31/2019

    The European Securities and Markets Authority Decision renewing the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients has been published in the Official Journal of the European Union. ESMA announced on December 19, 2018, that the existing restriction would be extended. The CfD Decision applies directly across the EU from February 1, 2019, for a period of three months.

    View the decision.

    View ESMA's announcement.
  • US Securities and Exchange Commission Grants and Extends Certain Exemptions for Security-Based Swaps
    01/31/2019

    The Securities and Exchange Commission has extended certain exemptions under the Securities Exchange Act of 1934 (Exchange Act) for security-based swap transactions. The relief, which is intended to facilitate the implementation of the security-based swaps regulatory regime under the Dodd-Frank Act, was originally offered by the SEC in 2011 and has been extended four times prior, most recently in 2018.

    Through this order, the Commission granted an extension of certain temporary relief provided by the SEC to address the fact that the Dodd-Frank Act revised the definition of “security” in the Exchange Act to include security-based swaps.  The relief, which was previously set to expire on February 5, 2019, will be extended until February 5, 2020.

    Read more.
    TOPIC: Derivatives
  • EU Authority Calls For Non-Enforcement of Impending Clearing Obligation for Small Financial Counterparties and of the Backloading Requirement
    01/31/2019

    The European Securities and Markets Authority has published a statement on the impending clearing and trading obligations for small financial counterparties and the reporting backloading requirement. Under the European Market Infrastructure Regulation, small FCs in Category 3 – FCs with less than €8 billion in aggregate month-end average of outstanding gross notional amount of uncleared derivatives at group level – are due to start clearing interest rate and credit derivatives subject to the clearing obligation on June 21, 2019. Once the clearing obligation is triggered, the related trading obligation under the Markets in Financial Instruments Regulation may also be triggered. In addition, the reporting backloading requirement is due to come into effect on February 12, 2019. However, it is foreseen that, under the EU's proposals to make technical changes to EMIR, known as EMIR Refit or EMIR 2.1, Category 3 FCs below the clearing threshold will be exempt from the clearing obligation and the backloading requirement will be deleted. The final text of EMIR Refit is now available, although it remains to be translated and published in the Official Journal.  Whilst EMIR Refit remains not in force, these obligations would technically arise, only to be eliminated shortly afterwards with the passage of this new legislation. In its statement, ESMA confirms that it does not expect national regulators to focus on any non-compliance by small FCs with the clearing obligation or by market participants with the backloading requirements.

    View ESMA's statement.
    TOPIC: Derivatives
  • EU Product Intervention Measure Banning the Sale of Binary Options is Extended
    12/27/2018

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. This has been published in the Official Journal of the European Union. ESMA announced in November 2018 that the existing restriction would be extended. The binary options Decision applies directly across the EU from January 2, 2019 for a period of three months.

    View the Decision.

    View ESMA's notification.
  • EU Contracts for Difference Product Intervention Measures to be Extended Again
    12/19/2018

    The European Securities and Markets Authority has published a statement announcing that its various restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from February 1, 2019, for a further three months. ESMA has powers under the Markets in Financial Instruments Regulation to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the European Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire, and it would then fall to member states to impose similar restrictions at a national level, if they so wish.

    ESMA considers that a significant investor protection concern in relation to retail clients still exists. Its statement confirms that the existing restriction, implemented on November 1, 2018, will be extended from February 1, 2019 for a further three months.

    View ESMA's statement.

    View details of the existing CfD restrictions.
  • US Securities and Exchange Commission Finalizes Rule of Practice 194
    12/19/2018

    The Securities and Exchange Commission has adopted, by a 3-2 vote, Rule of Practice 194, which establishes the process for a registered security-based swap dealer or major security-based swap participant (collectively, SBS Entities) to apply to the SEC for a waiver that would allow a statutorily disqualified natural person to effect or be involved in effecting security-based swaps on behalf of the SBS Entity, subject to certain conditions.  The final rule, which was first proposed in 2015, represents a continuation of the agency’s efforts to implement its security-based swap regulations pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and will become relevant when the SEC begins requiring registration of SBS Entities.

    Read more.
    TOPIC: Derivatives
  • European Commission Adopts Measures in Preparation for a No Deal Brexit
    12/19/2018

    The European Commission has published a Communication on Implementing the Commission's Contingency Action Plan for a no deal Brexit and has adopted all the legislative proposals and delegated acts announced in its November 2018 Contingency Plan. The actions relevant to the derivatives industry are the adoption by the Commission of:
     
    1. A temporary and conditional equivalence decision for CCPs already established and authorized in the U.K. CCPs established in third countries (which the U.K. will become on exit day) whose supervisory and legal regimes have been deemed to be equivalent to the EU regime may provide clearing services to clearing members or trading venues established in the EU. Such a CCP must be recognized by the European Securities and Markets Authority in accordance with the processes outlined in the European Market Infrastructure Regulation. The adopted decision would grant equivalence to the regulatory and legal regimes of the U.K. and Northern Ireland in relation to CCPs. The Commission's equivalence decision would apply for 12 months from exit day. ESMA remains to designate various U.K. CCPs.

    Read more.
  • US Securities and Exchange Commission Proposes Risk Mitigation Requirements for Uncleared Security-Based Swaps
    12/18/2018

    The Securities and Exchange Commission has proposed rules that would establish risk mitigation requirements with respect to a registered security-based swap dealer’s or major security-based swap participant’s (collectively, SBS Entities’) portfolio of uncleared security-based swaps.  The proposed rules would establish requirements for SBS Entities in respect of security-based swap portfolio reconciliation, portfolio compression and trading relationship documentation, and will become relevant when the SEC commences requiring registration of SBS Entities.  The proposal continues the agency’s ongoing efforts to implement its security-based swap regulations pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act and is intended to harmonize the SEC’s requirements with those of the Commodity Futures Trading Commission, which adopted similar risk mitigation requirements for uncleared swaps in 2012.

    Read more.
    TOPIC: Derivatives
  • US Commodity Futures Trading Commission Consults on Ether and the Potential Introduction of Ether Derivatives Contracts
    12/11/2018

    To further its understanding of Ether and its use on the Ethereum Network, the Commodity Futures Trading Commission has issued a request for input on several topics related to the virtual currency. The RFI poses a number of questions on Ether, including, among other things, its functionality, underlying technology, governance, markets, cybersecurity and custody. In addition, the CFTC asks several questions regarding Ether's susceptibility to market manipulation and the potential introduction of Ether derivatives contracts.

    The CFTC stated that the requested feedback will inform the work of the CFTC and its LabCFTC initiative to enhance the agency's oversight of virtual currency markets and develop regulatory policy. The CFTC also noted that it hopes to gain a greater understanding of the similarities and differences between Ether and bitcoin, along with potential risks and opportunities uniquely posed by Ether.

    Read more.
    TOPICS: DerivativesFinTech
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