Posts by: Alexandra Ames

European Money Markets Institute Announces Consultation on Euro Overnight Index Average Methodology Changes

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On March 20, the European Money Markets Institute (EMMI), the administrator of the euro overnight index average (EONIA), announced a consultation on changes to the methodology for calculating EONIA. This follows the working group on euro risk-free rates’ recommendations to EMMI to take various steps to ensure a smooth transition from EONIA to euro short-term rate (€STR).

The consultation seeks feedback on:

  • Modifying the current EONIA calculation methodology for a limited period to use €STR plus a spread. The spread represents the economic difference between the underlying interests the two rates measure (that is, an interbank lending rate versus a wholesale borrowing rate). The spread will be fixed for the period EONIA is calculated using this new methodology and based on data collected over a period of at least 12 months and calculated as a 15% trimmed mean of the observations.
  • Changing the publication time of EONIA from T (7pm CET) to T+1 (11am CET).
  • Publishing EONIA using the new methodology for the first time on October 2 as this will be the first day €STR is published.
  • Discontinuing publication of EONIA on January 3, 2022, which will reflect the market on December 31, 2021.

EBA Revises Recommendation on Equivalence of Confidentiality Regimes of Non-EU Authorities

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On November 8, the European Banking Authority (“EBA“) published a final report on recommendations on the equivalence of confidentiality regimes (EBA/REC/2018/03).

In the report, the EBA makes amendments to its recommendation on the equivalence of confidentiality regimes (EBA/REC/2015/01), which was originally published in April 2015. The purpose of the recommendation is to provide guidance for competent authorities on the equivalence of the confidentiality regime applicable to a particular third-country supervisory authority, whose participation in a given college is to be determined under Article 116(6) of the CRD IV Directive (2013/36/EU).

The EBA has added the following third-country authorities to the recommendation, following assessments of the professional secrecy and confidentiality frameworks under which they operate:

  1. The Abu Dhabi Global Market (“ADGM“) Financial Services Regulation Authority;
  2. The Republic of South Kora Financial Supervisory Service;
  3. The National Bank of Moldova;
  4. The Hong Kong Securities and Futures Commission (“SFC“).

The final report does not state the application date of the recommendations made in it.

ESMA Publishes Statement on No-Deal Brexit Contingency Plans of CRAs and Trade Repositories

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ESMA published a statement on the contingency plans of credit rating agencies (“CRAs“) and trade repositories (“TRs“) in the context of Brexit (ESMA80-187-149) on November 9.

ESMA has published the statement to raise market participants’ awareness of the readiness of CRAs and TRs for the possibility of there being a no-deal Brexit. ESMA states that entities using services provided by CRAs and TRs need to consider the scenario of a no-deal Brexit and the consequences of TRs and CRAs established in the UK losing their EU registration when the UK leaves the EU. READ MORE →

ESMA Further Extends the Prohibition on Binary Options

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European Securities and Markets Authority (“ESMA“) published a press release on November 9 stating that it has agreed to renew the prohibition of the marketing, distribution or sale of binary options to retail clients for a further three-month period from January 2, 2019.

ESMA published a decision notice on the prohibition in June, which has been in effect since July 2. In August, ESMA announced that it would extend the prohibition from October 2 for a further three-month period.

ESMA is extending the prohibition again as it considers that a significant investor protection concern related to the offer of binary options to retail clients continues to exist. The measure will be renewed on the same terms as the previous renewal decision.

ESMA intends to adopt the renewal measure in the coming weeks, following which it will publish an official notice on its website. The measure will then be published in the Official Journal of the EU.

Under the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“), ESMA can only introduce temporary intervention measures for a three-month period, following which the measures must be renewed or they automatically expire.

European Commission Approves Acquisition of Sole Control of OLSA by MAGNA

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On October 1, the European Commission announced that it has decided under Article 6(1)(b) of the EU Merger Regulation to approve the acquisition of sole control of OLSA S.p.A. by Magna Closures S.p.A. (“MAGNA“), both of Italy (M.8995).

MAGNA is an automotive supplier which manufactures and supplies automotive systems, assemblies, modules and components, primarily for passenger cars and light commercial vehicles. OLSA is an automotive supplier which manufactures and supplies lighting products for passenger cars and light commercial vehicles.

The transaction was examined under the simplified merger review procedure and the Commission concluded that the proposed transaction would not raise any competition concerns. This is due to the companies’ limited combined market position and the presence of a number of established competitors in the market.