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Financial Regulatory Developments Focus
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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.

  • US Regulators Clarify Position on Broker-Dealer Custody of Digital Asset Securities
    07/08/2019

    The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority have issued a joint statement clarifying how their traditional regulatory approaches would apply to how broker-dealers handle their customers' digital asset securities and transactions. Specifically, the statement focuses on how certain SEC and FINRA rules apply to broker-dealers that wish to take custody of digital asset securities or perform other noncustodial activities involving such assets.

    The SEC and FINRA staffs (collectively, the "Staffs") said that a number of firms have applied to FINRA to engage in broker-activities involving digital asset securities, and a number of registered broker-dealers have also submitted applications to expand their businesses to include digital asset securities services. Many of these applications cover proposed business models that would involve the applicant taking custody of digital asset securities, while others would involve certain noncustodial activities.

    Read more.
    TOPICS: FinTechSecurities
  • UK Secondary Legislation Published to Implement the Prospectus Regulation
    06/25/2019

    The Financial Services and Markets Act 2000 (Prospectus) Regulations 2019 have been formally published and will come into force on July 21, 2019.

    Read more.
    TOPIC: Securities
  • International Organization for Securities Commissions Publishes Report on Liquidity in Corporate Bond Markets Under Stressed Conditions
    06/21/2019

    The International Organization for Securities Commissions has published a report studying the effect of stressed market conditions on liquidity in corporate bond markets. The report arose out of concerns about liquidity in the corporate bond market in the years since the global financial crisis and, in particular, the possibility that a significant sell-off could trigger price volatility and temporarily depress prices. The report is based upon a review of existing studies of corporate bond markets, an examination of historic periods of market stress and discussions with industry stakeholders.

    Read more.
    TOPIC: Securities
  • Final EU Secondary Legislation Under the Prospectus Regulation Published
    06/21/2019

    Two Commission Delegated Regulations supplementing the EU Prospectus Regulation have been published in the Official Journal of the European Union. The first Regulation is on the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. It will supplement the requirements in the Prospectus Regulation on: (i) the review, approval and filing of the universal registration document and any amendments; (ii) the format of the prospectus, the base prospectus and the final terms; (iii) the specific information to be included in a prospectus, the minimum information to be included in the universal registration document and the reduced information to be included under the simplified disclosure regime for secondary issuances; (iv) the reduced content, standardized format and the sequence of the EU Growth prospectus; (v) the reduced content and standardized format of the specific summary; and (vi) the review and approval of prospectuses by national regulators. The Regulation also repeals, from July 21, 2019, the existing Implementing Regulation under the existing Prospectus Directive on the form and content of prospectuses.

    Read more.
    TOPIC: Securities
  • 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.
  • New EU Guidelines on Disclosure of Climate-Related Information
    06/18/2019

    The European Commission has published new, non-binding Guidelines on reporting climate-related information. The new Guidelines are supplementary to the guidelines issued by the Commission in 2017 on reporting non-financial information. The new Guidelines are intended to assist large public entities (with over 500 employees) to report climate-related information under the EU Non-Financial Reporting Directive. The new Guidelines incorporate the recommendations of the Financial Stability Board's taskforce on climate-related financial disclosures, taking into account the EU's forthcoming taxonomy on sustainable activities. The new Guidelines include guidance on reporting of climate-related information related to business models, key performance indicators, risks and their management. Further guidelines for banks and insurance companies are set out in the annex.

    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.
  • UK Law Commission Embarks Upon Review of Intermediated Securities System
    06/11/2019

    The Law Commission has been appointed to review potential legal issues with the U.K. intermediated securities system. Intermediated securities are shares and bonds held electronically through computerized credit entries.

    Read more.
    TOPIC: Securities
  • Financial Stability Board Publishes Report on Decentralized Financial Technologies
    06/06/2019

    The Financial Stability Board has published a report on the use of decentralized financial technologies and the implications these may have for financial stability, regulation and governance. The report has been delivered to G20 Finance Ministers and Central Bank Governors ahead of the G20 meeting on June 8-9, 2019.

    Read more.
  • Regulators Issue Recommendations on Sustainable Finance in Emerging Markets
    06/05/2019

    The Growth and Emerging Markets Committee, a committee of the International Organization of Securities Commissions that aims to promote the development and efficiency of emerging securities and futures markets, has published a series of recommendations on the development of sustainable finance in emerging markets and the role that securities regulators play in this arena. The report also contains an overview of sustainability-related regulatory initiatives in emerging markets and market trends arising in the sustainability sector.

    Read more.
  • Financial Stability Board Publishes User's Guide to Overnight Risk-Free Rates
    06/04/2019

    The Financial Stability Board has published a user's guide to overnight risk free rates, providing an overview of such rates and how they can be calculated, as well as proposals for how they can be used in cash products. The user's guide falls in line with the development of RFRs as alternative benchmarks.

    Read more.
  • European Securities and Markets Authority Launches Common Supervisory Action on MiFID II Appropriateness Rules
    06/03/2019

    The European Securities and Markets Authority has announced that it will launch a common supervisory action in the second half of 2019 on the application of the appropriateness requirements under the revised Markets in Financial Instruments Directive. The action will be undertaken as part of ESMA's mandate to build a culture of common supervision among EU national regulators.

    Read more.
  • 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.
  • UK Financial Conduct Authority Publishes Near Final Changes to Handbook Implementing the EU Prospectus Regulation
    05/31/2019

    The U.K. Financial Conduct Authority has published a Policy Statement containing its near final rules implementing the EU Prospectus Regulation, which will be set out in the FCA's new Prospectus Regulation Rules sourcebook. The FCA's new rules are aimed at aligning the U.K. rules with the EU Prospectus Regulation. The changes remain subject to finalization of certain related changes under the Financials Services and Markets Act 2000 and relevant EU legislation. Issuers seeking approval of a draft prospectus on or after July 21, 2019 must ensure their draft is in line with the EU Prospectus Regulation and PRR sourcebook. In the event the U.K. leaves the EU before that date, the proposals will not come into effect, and the U.K. would use the Financial Services (Implementation of Legislation) Bill to permit alignment of U.K. rules with those of the EU. The FCA would, in that situation, expect to issue a further Consultation Paper setting out proposals for replicating the EU Prospectus Regulation in the U.K. domestic regime. The FCA has so far declined to comment on the detail of any such proposals.

    Read more.
  • Revised EU Statement on the Share Trading Obligations in a No-Deal Brexit
    05/29/2019

    Following concerns regarding its March 19, 2019 statement, the European Securities and Markets Authority has published a revised statement on the impact of a no-deal Brexit on the trading obligation for shares where no decision on the U.K.'s equivalence as a third country market has been made. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The U.K. has adopted this requirement in its onshored MiFID II legislation. Similarly, following its exit from the EU, the new U.K. on-shored share trading obligation would restrict trading of shares in the U.K. to trades on U.K. trading venues unless a third-country equivalence decision was made.

    Read more.
  • EU Secondary Legislation for Financial Reporting Formats Published
    05/29/2019

    A Commission Delegated Regulation establishing Regulatory Technical Standards for electronic financial reporting formats under the European Transparency Directive has been published in the Official Journal of the European Union. The Transparency Directive aims to enhance the efficiency and transparency of European securities markets by obliging security issuers to provide a regular flow of information to investors. Amongst the obligations under the Directive, issuers must publish annual financial reports in accordance with certain specifications. One such specification requires that, from January 1, 2020, reports must be in a single electronic reporting format. This reporting format is now laid out in the RTS. The RTS enter into force on June 18, 2019 and will apply to annual financial reports containing financial statements for financial years beginning on or after January 1, 2020.

    Read more.
    TOPIC: Securities
  • European Central Bank Consults on European Mechanism for Issuance and Distribution of Debt Securities
    05/28/2019

    The European Central Bank, together with those national central banks that have adopted the Euro (collectively known as the Eurosystem), has launched a consultation on proposals for a harmonized European system for issuing and distributing Euro denominated debt securities within the EU. The consultation paper seeks feedback on the state of the existing market, the most appropriate ways to deal with certain issues faced by the market and the measures the Eurosystem has proposed for a potential new system.

    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.
  • International Body Consults on Issues Relating to Regulating Crypto-Asset Trading Platforms
    05/28/2019

    The International Organization of Securities Commissions has launched a consultation on the key issues to consider for regulating crypto-asset trading platforms (referred to as CTPs). The consultation paper, which aims to assist IOSCO member jurisdictions to assess the issues and risks relating to CTPs, is based on information obtained from national regulators on the operation of CTPs and their current or proposed regulatory approaches. The consultation does not cover Initial Coin Offerings, focussing instead on the secondary markets. Responses to the consultation are due by July 29, 2019.

    The consultation paper describes certain issues and risks related to trading of crypto-assets on CTPs. The paper also sets out key considerations and corresponding toolkits for each consideration. The considerations are: (i) access to CTPs; (ii) safeguarding assets; (iii) conflicts of interest; (iv) operations of CTPs; (v) market integrity; (vi) price discovery; and (vii) technology. The toolkits are for regulators to use to address the key considerations and related issues and risks. In addition, IOSCO notes that useful guidance on the issues is already available in its Objectives and Principles of Securities Regulation and the Assessment Methodology.

    View the consultation paper.
  • 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.
  • 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 Commission Responds to Uncertainty Regarding Scope of PRIIPs Regulation
    05/14/2019

    The European Commission has issued a response to concerns raised by the European Supervisory Authorities about the market impact of uncertainty around the scope of the Packaged Retail and Insurance-based Investment Products Regulation. In a letter to the Director General of the European Commission dated July 19, 2018, the heads of the ESAs raised the difficulties that manufacturers of financial products face in determining whether their products fall within the requirements of the PRIIPs Regulation. The letter describes the broader market impact that this uncertainty has caused, which includes a reduction in the availability of corporate bonds to retail investors, a reduction in the number and volume of low denomination issuances by non-financial corporates and greater difficulties for retail investors wishing to trade their bonds. In its response, issued on May 14, 2019, the European Commission refused to pass judgement on whether certain categories of products should be deemed to fall within or outside the scope of the PRIIPs Regulation and stressed that the determination of whether an instrument is a packaged retail investment product should be undertaken on a case-by-case basis.

    Read more.
  • UK Consultation on Legal Uncertainty in the Application of English Private Law to Cryptoassets, Distributed Ledger Technology and Smart Contracts
    05/09/2019

    The UK Jurisdiction Taskforce has published a consultation paper on key issues of legal uncertainty regarding cryptoassets, distributed ledger technology and smart contracts. The UKJT is involved in preparing an authoritative legal statement on the status of cryptoassets and smart contracts under English private law. The final statement will consider whether English private law sufficiently covers cryptoassets, DLT and smart contracts and where legal uncertainty may arise. The issues in the consultation are limited to English private law and do not include any issues on regulatory characterization, taxation, criminal law, partnership law, data protection, consumer protection, settlement finality, regulatory capital, anti-money laundering or counter-terrorist financing.

    UKJT is part of the LawTech Delivery Panel, which was established in 2018, with the aim of identifying barriers and opportunities for growth. The consultation closes on June 21, 2019.

    View the consultation paper.
  • US Authority Settles Charges Against Peer-to-Peer Virtual Currency Exchanger for Violating Registration and AML Requirements
    04/18/2019

    The U.S. Treasury Department's Financial Crimes Enforcement Network has announced that it has settled charges against Eric Powers, a peer-to-peer exchanger of convertible virtual currency, for violating the registration, program and reporting requirements of the Bank Secrecy Act. This marks FinCEN's first enforcement action filed against a peer-to-peer exchanger of virtual currency and represents the first time that FinCEN has disciplined an exchanger of virtual currency for failure to report currency transactions, as required under the Bank Secrecy Act.

    Read more.
  • Final EU Guidelines on Disclosure of Risk Factors in Prospectuses
    03/29/2019

    The European Securities and Markets Authority has published final guidelines on how national regulators should review risk factors as required by the new Prospectus Regulation. The guidelines aim to encourage more appropriate, focused and streamlined risk factor disclosures for securities. The purpose of including risk factors in a prospectus is to ensure that investors can assess the risks related to their investment, therefore allowing them to make informed investment decisions. 

    Read more.
    TOPIC: Securities
  • 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.
  • ​No-Deal Brexit Changes to UK Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules
    03/22/2019

    The Financial Conduct Authority has published a market bulletin that advises issuers and stakeholders of key changes to the Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules that will apply in the event of a no-deal Brexit.

    In the event of a no-deal Brexit, the U.K.’s primary market regime will apply to all issuers that have securities admitted to trading, or have applied for admission to trading, on a U.K.-regulated market or admitted to listing in the U.K., or that are making a public offer in the U.K. The rules will apply regardless of the country an issuer is incorporated in.

    Read more.
  • EU Statement on the Impact of a No-Deal Brexit on the Share Trading Obligation
    03/19/2019

    May 29, 2019 update: ESMA's guidance of March 19, 2019 has been superseded by revised guidance issued, details of which are available here.

    The European Securities and Markets Authority has published a statement on the impact of a no-deal Brexit on the trading obligation for shares. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The requirement is not applicable to transactions in shares traded in the EU on a non-systematic, ad-hoc, irregular and infrequent basis. ESMA's statement is relevant should there be a no-deal Brexit (currently set for March 29, 2019) and there is no equivalence decision for the U.K.

    Read more.
  • European Commission Adopts New Technical Standards under the Prospectus Regulation
    03/14/2019

    The European Commission has adopted a draft Delegated Regulation containing Regulatory Technical Standards on requirements for:
    • key financial information to be set out in the summary of a prospectus;
    • the publication of a prospectus;
    • the classification of prospectuses and practical arrangements to ensure machine readability of the classifications;
    • advertisements and their dissemination;
    • situations where the publication of a supplement to the prospectus is required; and
    • technical arrangements necessary for the functioning of the notification portal.

    The adopted RTS will repeal Commission Delegated Regulation (EU) No 382/2014 on the publication of supplements to a prospectus and Commission Delegated Regulation (EU) 2016/301 on the approval and publication of the prospectus and dissemination of advertisements.

    The adopted RTS will enter into force 20 days after they are published in the Official Journal of the European Union, which will take place once it is approved by the European Parliament and the Council of the European Union. The adopted RTS will apply directly across the EU from July 21, 2019, which is when the remainder of the Prospectus Regulation applies.

    View the adopted RTS.

    View the annexes to the adopted RTS.
    TOPIC: Securities
  • European Commission Adopts Draft Regulation on the Format, Content, Scrutiny and Approval of a Prospectus
    03/14/2019

    The European Commission has adopted a draft Delegated Regulation on the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. The draft Delegated Regulation is based on the technical advice provided to the Commission by the European Securities and Markets Authority in April 2018. The draft Regulation will repeal the existing Implementing Regulation under the existing Prospectus Directive (which will be finally repealed in July 2019) on the form and content of prospectuses.

    Read more.
    TOPIC: Securities
  • Report of the Technical Expert Group Subgroup of the European Commission on Green Bond Standard: Proposal for an EU Green Bond Standard
    03/06/2019

    In its Interim Report on green bonds, the Technical Expert Group has made a proposal for an EU Green Bond Standard. Green bonds are bonds specifically earmarked to be used for climate-related and environmental projects. The aim of the consultation was, in light of the European Commission’s Action Plan on Financing Sustainable Growth published in March 2018, to create a standard that would further improve the credibility of green bonds and help the EU market mature.

    Read more.
    TOPIC: Securities
  • New EU Prospectus Regulation: List of Thresholds Below Which Prospectus is Not Required
    02/08/2019

    The European Securities and Markets Authority has published a revised list of thresholds below which an offer of securities to the public will not need a prospectus in EU member states. The Prospectus Regulation introduced a new threshold of €1 million, below which an offer does not require a prospectus. A Member State may decide to raise the threshold to a maximum of €8 million, provided that the offer cannot be passported to another Member State. ESMA has drawn up this list to create transparency across the various regimes adopted in the EU.

    Read more.
    TOPIC: Securities
  • EU-Wide Listing Thresholds Report
    02/08/2019

    The European Securities and Markets Authority published a document listing the thresholds below which an offer of securities to the public does not need a prospectus in the various Member States of the EU. The document contains information, provided by national regulators, setting out: (i) a short description of the national thresholds below which no prospectus is required; (ii) a summary of any national rules that apply to offers below that threshold; and (iii) hyperlinks to the relevant national legislation and rules. 

    View the report.
    TOPIC: Securities
  • UK Financial Conduct Authority Consults on Proposed Changes to Handbook for Implementing the EU Prospectus Regulation
    01/28/2019

    The Financial Conduct Authority has published for consultation proposed changes to the Handbook. The changes are to align the Prospectus Rules sourcebook within the Handbook to ensure it is consistent with the new EU Prospectus Regulation that came into force on July 20, 2017.

    The EU Prospectus Regulation sets out information that companies need to disclose to investors and potential investors in a prospectus when raising capital. Even though certain provisions of the EU Prospectus Regulation were anticipated to come into effect after the U.K.’s anticipated exit from the EU on March 29, 2019, the EU Prospectus Regulation will still be applicable during any Brexit transition or implementation period.

    Read more.
  • International Body Issues Statement on Disclosure of Environmental, Social and Governance Matters
    01/18/2019

    The International Organization of Securities Commissions has issued a statement on the importance of issuers including environmental, social and governance matters when disclosing information material to investors’ decisions.

    Read more.
    TOPIC: Securities
  • 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.
  • Final EU Guidelines on Simple, Transparent and Standardized Criteria for Securitizations
    12/12/2018

    The European Banking Authority has published two sets of finalized guidelines under the Securitization Regulation which, along with targeted amendments to the Capital Requirements Regulation, forms part of the new EU Securitization Framework for simple, transparent and standardized securitizations from January 2019. Originators and sponsors will be required to notify the European Securities and Markets Authority of any securitization that meets the STS criteria to be able to use the "STS" designation. ESMA will maintain a list of all such securitizations on its website.

    Read more.
  • ​Further UK Legislation in Preparation for Brexit Comes Into Force
    12/06/2018

    Three pieces of U.K. legislation to onshore EU laws in preparation for Brexit have been made. These are:
     
    1. The Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1318).

    A number of technical changes have been made as a result of the consultation process, but these do not affect the fundamental intention and scope of the legislation. The Regulations come into force on December 7, 2018, except for the provisions amending the European Market Infrastructure Regulation, which will come in force on exit day. Advance applications for registration of a trade repository must be submitted to the Financial Conduct Authority between December 7, 2018 and immediately before exit day, instead of on exit day.

    These Regulations establish: (i) a temporary registration regime to enable U.K. and EU trade repositories to benefit - on complying with certain requirements - from temporary registration while the FCA considers their application; and (ii) a conversion regime that will allow U.K. trade repositories that are currently registered with the European Securities and Markets Authority to be registered as authorized U.K. trade repositories by the FCA from exit day.

    Read more.
  • UK Regulations Implementing the EU Securitization Regulation Made
    12/04/2018

    The U.K. Securitization Regulations 2018 have been laid before Parliament and will come into force on January 1, 2019. The Regulations implement the EU Securitization Regulation (also known as the STS Regulation) into U.K. law.

    The EU Securitization Regulation provides the criteria for identifying which securitizations will be designated as simple, transparent and standardized securitizations, a system to monitor the application of those criteria and common requirements on risk retention, due diligence and disclosure. It also allows (but does not require) originators, sponsors and securitization special purpose entities to use third-party firms to assess whether a securitization meets the STS criteria, provided that those firms are authorized by the relevant national regulator. Originators, sponsors or original lenders of a securitization will be required to retain on an ongoing basis a material net economic interest in the securitization of at least 5%. Related amendments to the Capital Requirements Regulation set out preferential regulatory treatment for investors, in particular, for bank investors, of their exposures to securitizations that are deemed to be STS securitizations.

    Read more.
  • European Supervisory Authorities Advocate Proportional Approach to Compliance With Certain Aspects of the Securitization Regulation
    11/30/2018

    The European Supervisory Authorities have issued a joint statement addressing two issues arising from the Securitization Regulation. The Securitization Regulation will apply directly across the EU from January 1, 2019 to securities issued under securitizations on or after January 1, 2019. Securitizations issued before that date may be referred to as STS securitizations, provided that they meet certain conditions.

    The first issue addressed in the joint statement relates to disclosure requirements for EU securitizations. The Securitization Regulation requires originators and sponsors to notify ESMA of any securitization that meets the "Simple, Transparent and Standardized" criteria. ESMA will maintain a list of all such securitizations on its website. Securitization special purpose entities, originators and sponsors of a securitization will be required to make certain information available via a securitization repository to holders of a securitization position, to the national regulators and, upon request, to potential investors. The European Securities and Markets Authority and the European Commission still have to address a number of market concerns on the proposed ESMA disclosure templates (that will be introduced as Technical Standards under the Regulation) as part of these transparency requirements. This is a process that will not be concluded by January 1, 2019.

    Read more.
  • UK Draft Legislation to Onshore EU Packaged Retail and Insurance-Based Investment Products for Brexit
    11/22/2018

    HM Treasury has published a draft version of the Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019. The EU PRIIPS Regulation requires a standardized disclosure document (called a Key Information Document or KID) to be provided when packaged investment or insurance-based investment products are sold to retail investors.

    The draft Regulations correct deficiencies in the U.K. Packaged Retail and Insurance-based Investment Products Regulations 2017 and in the directly applicable EU PRIIPS Regulation (and its secondary legislation) to be retained on Brexit. The draft Regulations will primarily be relevant for firms that manufacture, sell or advise on retail investment products that fall within the scope of the PRIIPs Regulation. This includes, but is not limited to, asset managers, insurers and investment advisors.

    Read more.
  • UK Government Publishes Guidance on Proposals to Onshore Primary Markets Legislation for Brexit
    11/21/2018

    HM Treasury has published explanatory guidance on a draft statutory instrument, the Official Listing of Securities, Prospectus and Transparency (Amendment) (EU Exit) Regulations 2019. The statutory instrument is still under development and a draft will be published in due course. The draft Regulations will amend Brexit-related onshoring deficiencies in the U.K. legislation that implemented the EU Prospectus Directive, the Transparency Directive and the Consolidated Admissions and Reporting Directive, which together make up the EU legal framework for primary markets. No deficiencies have been identified for the CARD. 

    Read more.
  • UK Government Publishes Guidance on Proposals to Onshore EU Market Abuse Regulation for Brexit
    11/21/2018

    HM Treasury has published explanatory information on a draft statutory instrument, the Market Abuse (Amendment) (EU Exit) Regulations 2018. The statutory instrument is still under development and a draft will be published in due course. The draft Regulations will affect the Financial Conduct Authority and all natural and legal persons which issue or trade in financial instruments admitted to trading or traded on an U.K. or an EU trading venue, including legal firms, professional service firms and any legal person that obtains access to the inside information of an issuer.

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  • UK Prudential Regulator Finalizes Supervisory Approach for New EU Securitization Framework
    11/15/2018

    The U.K. Prudential Regulation Authority has published a Policy Statement setting out its approach to supervision under the new EU securitization framework that will take effect from January 1, 2019. The PRA consulted on its proposals in May 2018. The incoming EU framework consists of: (i) the Securitization Regulation, which imposes general requirements for all EU securitization activity and outlines the criteria and process for designating certain securitizations as "Simple, Transparent and Standardised"; and (ii) revisions to the banking securitization capital framework within the Capital Requirements Regulation. Respondents to the PRA's consultation on its approach were largely supportive. The PRA has made some changes (outlined in the Policy Statement) to its consultation text in line with comments received.

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  • Financial Stability Board Progress Report on Reforming Major Interest Rate Benchmarks
    11/14/2018

    The Financial Stability Board has published a progress report on ongoing reforms to major interest rate benchmarks. The FSB has been co-ordinating international reform work, through its Official Sector Steering Group, since 2014, when it made several recommendations aimed at addressing cases of attempted manipulation in relation to key IBORs and the decline in liquidity in certain interbank unsecured funding markets. The OSSG launched a third major initiative in 2016, to improve contract robustness to address risks of discontinuation of widely-used interest rate benchmarks. That initiative is being led by the International Swaps and Derivatives Association, which launched a consultation on fallback rates in July 2018.

    The progress report provides an update since the FSB's progress report in October 2017 and covers:
     
    1. Developments in Interbank Offered Rates, including discussion of the future of LIBOR.
    2. Identification of and transition to risk-free rates, where appropriate, for transactions denominated in USD, EUR, JPY, GBP, CHF, AUD, BRL, CAD, HKD, MXN, SGD and ZAR.
    3. The development of fallback rates to enhance contractual robustness.

    The FSB proposes to publish a further progress report in late 2019.

    View the progress report.

    View details of the October 2017 progress report.

    View details of ISDA's July 2018 consultation on fallback rates.

    View FSB statement welcoming ISDA's July 2018 consultation.
  • EU Final Draft Technical Standards and Technical Advice Published Governing Securitization Repositories and Data Access
    11/12/2018

    On November 12, 2018, ESMA published a series of documents delivering on some of its outstanding mandates to provide draft technical standards and technical advice to supplement the Securitization Regulation. The Securitization Regulation will apply directly across the EU from January 1, 2019. ESMA has been mandated to provide draft regulatory and implementing technical standards and technical advice to supplement a number of the Regulation’s provisions. ESMA has also published a statement on its near-term implementation of the Securitization Regulation, to assist market participants in understanding ESMA’s role and its progress on its deliverables.

    View ESMA's Final Report on securitization.

    View ESMA's Final Report on technical advice.
    TOPIC: Securities
  • EU Final Draft Technical Standards and Technical Advice Published Governing Securitization Repositories and Data Access
    11/12/2018

    The European Securities and Markets Authority has published a series of documents delivering on some of its outstanding mandates to provide draft technical standards and technical advice to supplement the Securitization Regulation (also known as the STS Regulation). The Securitization Regulation will apply directly across the EU from January 1, 2019. ESMA has been mandated to provide draft regulatory and implementing technical standards and technical advice to supplement a number of the Regulation's provisions. ESMA has also published a statement on its near-term implementation of the Securitization Regulation, to assist market participants in understanding ESMA's role and its progress on its deliverables.

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    TOPIC: Securities
  • European Money Markets Institute Launches Second Consultation on Hybrid Methodology for Euribor
    11/12/2018

    The European Money Markets Institute has published a second consultation paper (dated October 17, 2018) on its proposals to introduce a hybrid determination methodology for the Euro Interbank Offered Rate (Euribor). EMMI is the administrator for Euribor, a major euro interest reference rate for unsecured interbank short-term lending and borrowing. Euribor was classed as a critical benchmark of systemic importance for financial stability by the European Commission in 2016.

    The consultation paper sets out a summary of EMMI's findings during the testing phase for the newly proposed hybrid methodology, which took place between May and July 2018, and provides details on EMMI's proposals for the different methodological parameters that were yet to be specified when EMMI's first consultation was issued in March 2018. The consultation paper seeks feedback from market participants on a number of questions on aspects of the proposed methodology.

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  • EU Legislation Published to Update Supervisory Reporting Requirements
    11/09/2018

    A Commission Implementing Regulation supplementing the Capital Requirements Regulation has been published in the Official Journal of the European Union. The Implementing Regulation amends the existing Implementing Regulation ((EU) No 680/2014) to reflect the gradual supplementation and amendment of elements of the CRR reporting requirements by the adoption of further Regulatory Technical Standards. The Amending Regulation was adopted by the European Commission on October 9, 2018. It amends the existing Implementing Regulation to set out:
    • additional requirements relating to prudent valuation adjustments of fair-valued positions;
    • additional requirements to accommodate the reporting on securitization positions subject to the revised securitization framework; and
    • minor changes to the reporting requirements on the geographical distribution of exposures.

    The Amending Regulation will enter into force on November 29, 2018 and will apply directly across the EU from December 1, 2018.

    View Commission Implementing Regulation (EU) 2018/1627.
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