On November 17, 2015, the European Securities and Markets Authority (“ESMA“) launched a database of financial instruments that have been suspended or removed from trading under Article 41 of the Markets in Financial Instruments Directive (2004/39/EC) (“MiFID“).

The database contains information about suspensions and removals that has been notified to ESMA under Article 41(2) of MiFID. According to an accompanying press release, the database covers financial instruments admitted to trading in European regulated markets and displays a list of the current suspensions in these markets, but not suspensions linked to them. The database also allows searching for instrument currently or previously suspended to consult the key details of its suspensions.

On October 29, 2015, the European Commission published a press release announcing that the European Parliament has adopted the proposed Regulation on reporting and transparency of securities financing transactions (the “SFT Regulation“).

Securities financing transactions (“SFTs“) allow market participants to access secured funding, in order to secure financing for their activities. This involves the temporary exchange of assets as collateral for a funding transaction.

The Regulation, proposed by the European Commission in January 2014, enhances transparency in the shadow banking sector in three ways:

• introduction of reporting by any EU financial or non-financial counterparty (excluding SMEs) of all SFTs, except those concluded with central banks, to central databases known as trade repositories. Depending on their category, firms should start reporting at different stages from 12 to 21 months after the entry into force of the relevant regulatory technical standards;
• requirement for investment funds to disclose information regarding their use of SFTs and total return swaps to investors in their regular reports and in their pre-contractual documents from the entry into force of the Regulation, while the existing funds will have 18 months to amend them; and
• introduction 6 months after the entry into force of the Regulation of some minimum transparency conditions that should be met on the reuse of collateral, such as
  • counterparty’s consent to the reuse must have been obtained in a written agreement;
  • the potential risks must have been disclosed to the counterparty;
  • the collateral reused must be shifted from the account of the counterparty to the account of the re-user.

The provisions relating to reuse apply to all EU entities as well as third country entities which reuse collateral belonging to an EU entity.

The Commission has also published FAQs on the SFT Regulation.

Following adoption by Parliament, the SFT Regulation will be formally adopted by the Council in the near future, and will be published in the Official Journal of the EU.

On October 26, 2015, the European Commission published the text C(2015) 7245 final of a Delegated Regulation it has adopted on regulatory technical standards (RTS) for prudent valuation under Article 105(14) of the Capital Requirements Regulation  (Regulation 575/2013).

The Delegated Regulation specifies how additional valuation adjustments (“AVAs“) should be applied to fair-value positions to determine a prudent value that achieves an appropriate degree of certainty having regard to:

• the dynamic nature of trading book positions;
• the demands of prudential soundness; and
• the mode of operation and purpose of capital requirements in respect of trading book positions.

The Delegated Regulation specifies two approaches for calculating AVAs for the purposes of determining the prudent value of fair-valued positions: a simplified approach and a core approach.

A separate Annex to the Delegated Regulation sets out the formulae to be used for the purpose of aggregating AVAs.

The next step will be for the Council of the EU and the European Parliament to consider the Delegated Regulation.