EMIR

ESMA Publishes Draft Technical Standards on the Implementation of EMIR

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On September 27 ESMA published its final draft regulatory technical standards (RTS) which detail how the requirements of EMIR are to be implemented. The draft RTS have been developed through a consultation process which began in February 2012 with the publication of ESMA’s discussion paper and continued in June 2012 with the publication of ESMA’s consultation paper. The final draft RTS incorporate several changes to the initial version, and set out:

  • the details of derivative transactions that need to be reported to trade repositories, including confirming that:
    • that the reporting of collateral can be done on a portfolio basis; 
    • the reporting of mark to market values is only applicable to those counterparties under the obligation to calculate those on a daily basis;
  • clarification on how clearing thresholds will operate, including that employee’s benefits and acquisitions would be covered by the hedging definition;
  • the risk mitigation techniques for OTC derivatives that are not centrally cleared (including timely confirmation, portfolio compression and reconciliation); and
  • a set of organisational, conduct of business and prudential requirements for CCPs to ensure sound and resilient counterparties.

The final draft RTS have been submitted to the European Commission who have until December 31 to decide whether to endorse them. The RTS, once endorsed, will be directly applicable across the European Union.

FSA Consults on Proposals to Change Client Money and Custody Assets Regime

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On 6 September 2012, the FSA published a consultation and discussion paper proposing changes to the client money and custody assets regime for firms undertaking investment business.  The paper is split into three parts:

   I.        A consultation on changes to the FSA’s client assets regime to bring them into line with EMIR’s segregation and portability requirements. 

II.        The introduction of proposals to permit investment firms to operate multiple client money pools that will be legally and operationally separate. 

III.        An overview of the FSA’s review of its client assets regime, focusing on ways to improve the regime in the event that an investment firm becomes insolvent.

The proposed introduction of client money sub-pools is considered by the FSA to potentially be the most radical change in the client assets regime in over two decades.

The deadline for comments on Part I is 16 October 2012, with comments on Parts II and III required by 30 November 2012.  The FSA anticipates the publication of a feedback statement on Part I during December 2012, with feedback on Parts II and III to be provided in the first half of 2013.

ESMA Proposed Rules on Derivatives, Central Counterparties and Trade Repositories

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On June 25, the European Securities and Markets Authority (ESMA) issued a consultation paper containing draft Regulatory Technical Standards and draft Implementing Technical Standards, which set out specific details of how the Regulation of the European Parliament and Council on OTC derivatives, central counterparties and trade repositories (EMIR) will be implemented. A public hearing will be held on July 12, and comments on the paper must be submitted by August 5. Press Release. Consultation Paper.

EU Council Compromise Proposals on EMIR and MiFID II

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On 21 June 2012, the Presidency of the Council of the EU published compromise proposals (dated 21 June 2012) on MiFID II and EMIR. Both compromise proposals state that the proposals have been prepared following discussions in meetings of the working party on financial services. Compromise Proposal on MiFID II. Compromise Proposal on EMIR.