European Securities and Markets Authority (“ESMA”)

ESMA Publishes 17th Extract from EECS’ Enforcement Decisions

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The European Securities and Markets Authority (ESMA) has published extracts from the European Enforcers Coordination Sessions confidential database of enforcement decisions on financial statements. European Enforcers monitor and review International Financial Reporting Standards (IFRS) statements and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law. The decisions included in this publication were taken by national enforcers in the period from February 2013 to November 2014

The aim of the publication is to provide issuers and users of financial statements with relevant information on the appropriate application of the IFRS. It will inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS – namely, whether treatments are considered as being within the accepted range of those permitted by IFRS. The publication of the decisions, together with the reasoning behind them, will contribute to a consistent application of IFRS in the EEA.  Release.

ESMA Comments on MiFID II Implementing Measures

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On June 16, 2015, the European Securities and Markets Authority (ESMA) published a statement by on its work on implementing measures under MiFID II (Directive 2014/65/EU) and MiFIR (Regulation 600/2014).

The statement explains that the following three areas are receiving the most attention from stakeholders:

  • Non-equity transparency.  ESMA acknowledges that it will not be able to find the ideal system that perfectly balances transparency and liquidity and that will satisfy the preferences of all market participants. However, ESMA is trying to find reasonable and workable compromises and it is ready to look at the non-equity rules again, once they are in operation, to react to potential deficiencies. ESMA is also thinking about a more flexible system that better reflects market developments and that can be based on better quality data. ESMA’s approach on bond market transparency is likely to look different to the position consulted on.
  • Position limits. The range of contracts captured varies from highly liquid to completely illiquid. This wide variation implies that ESMA has to be cautious and that a one-size-fits-all approach cannot be the solution.
  • Ancillary activity. There will be “major refinements” in ESMA’s proposal compared to the text that was consulted on in relation to the test of whether non-investment firms perform investment services as an ancillary activity to their main business.

ESMA, ISDA, and FIA Europe Publish Capital Markets Union Responses

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The European Securities and Markets Authority (“ESMA”), the International Swaps and Derivatives Association (“ISDA”) and FIA Europe have published their responses to the European Commission’s Green Paper on Building a Capital Markets Union (“CMU”).

Whilst supporting the aim of building deeper and more integrated capital markets across all of the EU, ESMA’s response stressed how its main objectives of enhancing investor protection and promoting stable and orderly financial markets can contribute to the CMU. The response contains specific proposals for improved access to credit information for SMEs and increasing cross-border retail participation in investment funds such as UCITS. ISDA and FIA Europe’s joint response highlights the crucial role derivatives play in capital markets and those derivative reforms in Europe governing clearing, margining and trading activities should be calibrated to a standard that also facilitates the efficient functioning of derivatives markets, without damaging liquidity.

ESMA Updates Q&A on Application of AIFMD

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On May 12, 2015, the European Securities and Markets Authority (ESMA) published an updated version of its Q&A paper on the application of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) (2015/ESMA/850). The Q&A includes new questions and answers on reporting and calculation of leverage. The aim of the Q&A is to promote common supervisory approaches and practices in the application of the AIFMD and its implementing measures.

ESMA Publishes Guidelines on the Definitions of Commodity Derivatives Under MIFID

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On May 6, 2015, the European Securities and Markets Authority (ESMA) published guidelines (ESMA/2015/675) on the definitions of commodity derivatives and their classification under C6 and C7 listed in Section C of Annex 1 to the Markets in Financial Instruments Directive (2004/39/EC) (MiFID).

The guidelines will apply to national competent authorities from August 7, 2015 and are intended to apply until the MiFID II Directive comes into force on January 3, 2017. The guidelines will clarify the definitions by specifying, in particular, what is meant by “physically settled” and confirming that forwards traded on a regulated market or multilateral trading facility (MTF) fall within the scope of MiFID.

ESMA Publishes Consultation Paper on Clearing Obligation Under EMIR

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On May 11, 2015, the European Securities and Markets Authority (ESMA) published a fourth consultation paper (ESMA/2015/807) on the clearing obligation under EMIR (the Regulation on OTC derivative transactions, central counterparties and trade repositories (Regulation 648/2012)). The consultation paper provides clarifications on various aspects of the draft regulatory training standards that ESMA is required to draft and submit to the European Commission. Stakeholders are invited to provide comments on the consultation paper before July 15, 2015.

ESMA Recognizes Third-Country CCPs

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The European Securities and Markets Authority (ESMA) has recognised ten third-country Central Counterparties (CCPs) in Australia, Hong Kong, Japan, and Singapore. The recognition allows these CCPs to provide clearing services to clearing members or trading venues established in the EU. The recognition is based on an assessment of these jurisdictions by the European Commission as “equivalent” with regard to their legal and supervisory arrangements for CCPs, as well as several other steps, including the conclusion of cooperation agreements with the relevant third-country authorities and the consultation of certain European competent authorities and central banks, as required by EMIR. ESMA has published a list of the recognised third-country CCPs as well as the classes of financial instruments covered by the recognition.

ESMA Call for Evidence on Investments Using Virtual Currency or Distributed Ledger Technology

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On April 22, 2015, the European Securities and Markets Authority (ESMA) published a call for evidence on investments using virtual currency (vc) or distributed ledger technology.

ESMA has been monitoring and analyzing VC investment over the last six months to understand developments in the market, potential benefits or risks for investors, market integrity or financial stability, and to support functioning of the EU single market. ESMA is sharing its analysis to promote wider understanding of innovative market developments. It requests feedback and any additional information on the following:

  1. VC products. For example, collective investment schemes or derivatives such as options and contracts for difference that have VC as an underlying or invest in VC related businesses and infrastructure. Annex II to the paper provides an overview of VC investment products identified by ESMA.
  2. VC based assets and securities and asset transfers. For example, financial assets such as shares and funds that are exclusively traded using VC distributed block chains (also known as block chains).
  3. The application of the distributed ledger technology to securities and investments, whether inside or outside a VC environment.

The consultation closes on July 21, 2015.

ESMA intends to monitor the evolution of investments using VC or distributed ledger technology to ensure that regulators are aware of significant market developments. Subject to assessing the responses received to the call for evidence, it has no immediate plans to take any regulatory action.

ESMA to Centralize Instrument Reference and Trade Repositories Data

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The European Securities and Markets Authority (“ESMA”) has launched two major projects at the request of a number of National Competent Authorities (“NCAs”): the Instrument Reference Data Project and the Trade Repositories Project. The former envisages ESMA providing a central facility in relation to instrument and trading data and the calculation of transparency and liquidity thresholds required in relation to the Markets in Financial Instruments Regulation (“MiFIR”), while under the latter ESMA is to provide a single access point to trade repositories data under EMIR.

The request involves a delegation of some of the NCAs’ tasks related to data collection requirements under MiFIR and the Market Abuse Directive to ESMA, as well as the creation of a central access point for regulators to data of the EU’s six trade repositories. ESMA will collect data directly from market infrastructures, and make it available to NCAs and the public through a centralized system. Centralization of these functions is expected to save on costs compared with building similar systems in each country, lowering the burden on the financial system and EU taxpayers, while also working towards harmonization and support of the single market. The Instrument Reference Data Project is expected to go live in early 2017, and the Trade Repositories Project in 2016.