ESMA

ESMA Publishes First Annual Statistical Report on Retail Investment Products

 

On January 10, ESMA published its first annual statistical report on the performance and costs of retail investment products in the EU (ESMA 50-165-731).

The report highlights, in particular, the significant impact of costs on the final returns that retail investors make on their investments. It covers undertakings for collective investments in transferable securities (“UCITS“), alternative investment funds sold to retail investors (“retail AIFs“) and structured retail products (“SRPs“).. READ MORE

ESMA Renews Restriction of CFDs for Further Three Months

 

On December 19, European Securities and Markets Authority (“ESMA”) published a press release announcing it is renewing the restriction on the marketing, distribution or sale of contracts for differences (“CFDs”) to retail clients. The restriction has been in effect since August 1, 2018 and the extension is for 3 months from February 1, 2019. The extension is because ESMA considers that a significant investor protection concern related to the offer of CFDs to retail clients continues to exist. The renewal is on the same terms as the previous renewal on November 1, 2018 and include:

  • Leverage limits on the opening of a position by a retail client from 30:1 to 2:1, which vary according to the volatility of the underlying.
  • A margin close out rule on a per account basis.
  • Negative balance protection on a per account basis.
  • A restriction on the incentives offered to trade CFDs.
  • A standardized risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.

ESMA Adopts Decision to Renew Ban on Marketing, Distribution or Sale of Binary Options

 

On December 21, European Securities and Markets Authority (“ESMA”) published a notice of its decision to renew the prohibition on the marketing, distribution or sale of binary options to retail clients as it considers that a significant investor protection concern related to the offer of binary options to retail clients continues to exist. The decision renews on the same terms as the previous renewal decision of September 21, 2018. The decision was made under Article 40 of the Markets in Financial Instruments Regulation (600/2014) and applies from January 2, 2019 for three months.

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

 

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

 

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.

ESMA Publishes two Decisions on MiFID II Assessments of Third Country Trading Venues

 

ESMA published the two decisions of its board of supervisors on October 11 (both dated September 26, 2018). The following decisions were made on the delegation to the ESMA chair of assessments of third-country trading venues and related to:

  • A decision on the assessment for the purposes of Articles 20 and 21 of the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) (ESMA70-155-5775).
  • A decision on the assessment for the purposes of Article 57(4) of the MiFID II Directive (2014/65/EU) (ESMA70-155-5905).

The decisions were regarding the treatment of transactions executed by EU investment firms on third-country trading venues, for post-trade transparency under MiFIR, and the treatment of positions held in contracts traded on those venues for the position limit regime under the MiFID II Directive. ESMA published opinions in December 2017 specifying that, subject to third-country trading venues meeting a set of criteria, investment firms trading on those trading venues are not required to make transactions public in the EU via an approved publication arrangement (“APA“).

In the decisions, the board of supervisors delegates responsibility for non-controversial assessments of third-country trading venues for these purposes to the ESMA chair. The decisions specify the criteria that the chair will use when assessing whether to consider a third-country entity as a trading venue for the purposes of Articles 20 and 21 of MiFIR or Article 57(4) of the MiFID II Directive. The board of supervisors retains its powers to perform controversial assessments of third-country trading venues.

FCA Releases Statement on Speculative Investments

 

Following the publication of product intervention measures by ESMA in relation to contracts for difference (“CFDs“) earlier this year, the Financial Conduct Authority (“FCA“) has provided a statement in relation to high risk investments and retail clients.

The FCA noted in its statement that it would work with European regulators (including ESMA) to observe the alternative speculative product market, in particular where retail clients are involved, in order to ensure ESMA’s measures are not being avoided by replacing CFDs with other similar products.

The FCA stated that firms “should pay particular attention to the leverage made available to retail clients and consider whether the product is offered on terms that act in the best interests of the client”.

The full statement is available here.

EC Seeks Guidance on Sustainable Finance

 

The European Commission (“EC“) published an open letter to EIOPA and ESMA on August 1, 2018. The letter sought technical advice in relation to sustainable finance, in particular technical advice relating to legislation.

The letter, the full version of which is available here, outlines that the European Commission adopted a package of measures on sustainable finance on May 24, 2018, however they are seeking advice in relation to the possible amendment of legislation such as UCITS, MiFID II and Solvency II.

The aim of the letter, and the possible changes proposed therein, is to incorporate sustainability risks in the decisions taken and processes applied by financial market participants.

The letter asks that EIOPA and ESMA provide their insight by April 30, 2019.

ESMA Launches Interactive Single Rulebook

 

On February 14, 2018, the European Securities and Markets Authority (“ESMA“) launched a new interactive single rulebook to help facilitate the consistent application of the EU single rulebook in the securities markets area.

In a related press release, available here, ESMA explains that this new interactive tool will provide market participants and other interested stakeholders with a comprehensive overview of and easy access to all level 2 and level 3 measures adopted in relation to a level 1 text. This includes all relevant delegated and implementing acts adopted by the European Commission (including regulatory technical standards and implementing technical standards developed by ESMA and endorsed by the Commission), as well as guidelines, opinions and Q&As issued by ESMA. The interactive single rulebook is described as a “documentation tool,” and users are reminded that they should refer to the Official Journal of the EU for the authentic version of EU legislation. ESMA is committed to developing the online tool in its 2018 work program.