On December 4, the European Commission announced that it had fined eight international banks a total of more than 1.7 billion for their participation in illegal cartels in markets for financial derivatives covering the European Economic Area.
Using the cartel settlement procedure, the Commission reached two separate decisions; one decision involved seven separate bilateral infringements relating to interest rate derivatives denominated in Japanese yen. The companies involved were UBS, RBS, Deutsche Bank, JPMorgan, Citigroup and RP Martin.
The other decision was made in relation to a collusion by four banks in relation to interest rate derivatives denominated in euro. The banks were Barclays, Deutsche Bank, RBS and Société Générale. Utilizing the Commission’s 2006 Leniency Notice, Barclays and UBS received complete immunity from fines. Announcement.
On November 20, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published its report (dated November 19) on the proposed Directive on payment accounts.
The report contains a European Parliament legislative resolution on the proposed Directive on payment accounts, the text of which sets out suggested amendments to the European Commission’s original proposal, which was published in May 2013. Report.
On November 14, the European Commission published an updated document setting out its agenda and timetable for the legislative proposals and non-legislative acts related to financial services that it expects to adopt between November 1 and December 31. The most recent previous version of this document was the July 2013 update. Updated Document.
In a press release dated October 23, the European Parliament announced its adoption of the final report of the special committee (CRIM). The European Commission also published a press release welcoming the report.
On October 3, the European Commission published a consultation paper on crowdfunding in the EU alongside a set of FAQs. In launching the consultation, the Commission aims to explore how EU action could promote crowdfunding in Europe. A range of soft-law measures, such as awareness raising, public funding and coordination of self-regulatory or national regulatory best practices will be considered. Responses can be submitted via an online questionnaire until December 20, and the consultation closes on December 31. Consultation Paper. FAQs.
On July 24, the European Commission issued legislative proposals to update and complement the current EU legal framework on payment services to develop further an EU-wide single market by promoting more competition, security and innovation in the field of electronic payments. The Commission noted that this move may be worth billions in savings for the European economy in the coming years, which will result in new business opportunities for a fast growing market. To read the entire Orrick Alert, please click here.
On September 18, the European Commission published a proposed Regulation on indices used as benchmarks in financial instruments and financial contracts, together with a number of related documents, including an impact assessment and a set of frequently asked questions.
The aim of the proposed Regulation is to ensure the integrity of and restore confidence in benchmarks. In broad terms, the Commission intends to achieve this by ensuring that benchmarks are not subject to conflicts of interest, are used appropriately and reflect the actual market or economic reality they are intended to measure.
The proposed Regulation will now pass to the European Parliament and the Council of the EU for consideration under the ordinary legislative procedure. Proposed Regulation.
Lawyers for the European Commission and EU member states are in public disagreement over the legality of the FTT. A leaked legal opinion produced by the EU Council’s legal service alleged that the FTT was both incompatible with EU law and likely to distort competition. The Commission “strongly disagrees with the Council lawyers’ opinion.” The report also notes that a “very thorough” legal analysis had been conducted on the FTT proposal.
On September 3, the European Securities and Markets Authority (ESMA) published its advice to the European Commission (the Commission) on the equivalence of the regulatory regimes of Australia, Hong Kong, Japan, Singapore, Switzerland and the United States under EMIR. EMIR is the Regulation applicable to OTC derivative transactions, central counterparties (CCPs) and trade repositories (TRs) (Regulation 648/2012)).
The rules of these countries, covering central clearing, CCPs, TRs and non-financial counterparties and risk mitigation techniques for uncleared trades, were compared with the requirements under EMIR. The supplementary press release proposes conditional equivalence for the following regimes:
CCPs – Honk Kong, Singapore and the United States;
Central clearing, requirements for non-financial counterparties and risk mitigation techniques for uncleared trades – Japan and the United States; and
TRs – the United States.
ESMA’s technical advice should be used by the Commission when preparing any possible equivalence decisions.
ESMA will deliver advice on areas it has not yet covered for Australia, Canada, Hong Kong, India, Singapore, South Korea and Switzerland by October 1. A letter dated September 2 from ESMA Chair Steven Maijoor to Commission Director General of Internal Market and Services Jonathan Faull includes further guidance and detail on the technical advice for certain countries, including the United States.
On July 22, the European Commission answered the question on whether a rolling spot Foreign Exchange on margin takes the form of a derivative contract or a contract for difference to be considered a financial instrument under the Markets in Financial Instruments Directive (MiFID).
The European Commission confirmed in its answer that a rolling spot FX contract can be indefinitely renewed, and no currency is actually delivered until a party affirmatively closes out its position, which exposes both parties to fluctuations in the underlying currencies. Hence, rolling spot foreign exchange contracts are a type of derivative contract relating to currencies and are considered financial instruments as defined under MiFID. Answer.
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