Markets in Financial Instruments Regulation (“MiFIR”)

European Commission Publishes Communication on Equivalence Policy With Non-EU Countries

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On July 29, the European Commission published a communication (and annex) on equivalence in the area of financial services. The Commission highlights recent improvements to the design of EU equivalence regimes and notes that significant changes have been introduced to the equivalence regimes in a number of legislative amendments relating to the proposed:

  • Omnibus Regulation relating to the powers, governance and funding of the European Supervisory Authorities (ESAs) – where the role of each ESA in monitoring equivalent third countries is strengthened;
  • Regulation amending the European Market Infrastructure Regulation (EMIR) supervisory regime for EU and third-country central counterparties (CCPs) (EMIR 2.2) – where a more risk-sensitive and proportionate approach for third-country regimes is being introduced; and
  • Investment Firms Directive (IFD) – where new assessment criteria, safeguards and reporting obligations for third-country firms are being created.

In relation to making equivalence assessments, the Commission emphasizes that decisions are not taken in isolation and proportionality is very important, and it notes that the Commission is concerned about identifying risks to the EU financial system.

The communication also summarizes equivalence decisions adopted since January 2018 and sets out its priorities for 2019 and 2020, including:

  • continuing work on equivalence assessments, especially relating to the Regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds;
  • repealing existing decisions where the third-country framework no longer delivers the necessary outcomes (for example, under the CRA Regulation);
  • focusing on high-impact areas and third countries (EMIR (Regulation 64/2012) is specifically mentioned);
  • areas where there is an impending review or expiration of an equivalence deadline (the Capital Requirements Regulation (575/2013) is specifically mentioned); and
  • examining market segments that are undergoing dynamic or structural changes (the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR) is specifically mentioned).
  • The communication included the communication itself, an annex and a press release.

Financial Services Trade Associations Urge HM Treasury to Recognize EEA Derivatives Trading Venues in Event of No-deal Brexit

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A number of key UK, EU and international financial services trade associations published a letter (dated April 5) to HM Treasury on the equivalence of European Economic Area (EEA) derivatives trading venues under the EU retained versions of European Market Infrastructure Regulation (EMIR) (648/2012) (UK EMIR) and the Markets in Financial Instruments Regulation (600/2014) (UK MiFIR) if there is a no-deal Brexit.

The trade associations highlight the disruptive impact on UK market participants and European derivatives markets arising from the absence of HM Treasury equivalence determinations:

  • Under Article 28(4) of UK MiFIR with respect to EEA multilateral trading facilities (MTFs) and organized trading facilities (OTFs). This will mean that UK financial counterparties (FCs) and UK non-financial counterparties (NFCs) over the clearing threshold would cease to be able to execute transactions in over-the-counter (OTC) derivatives subject to the trading obligation under UK MiFIR on those venues in a no-deal Brexit.
  • Under Article 2a of UK EMIR with respect to EEA regulated markets. This will mean that EEA exchange-traded derivatives (EEA ETDs) are considered OTC derivatives under UK EMIR in a no-deal Brexit.

The trade associations urge HM Treasury to prepare the necessary measures to recognise the equivalence of EEA derivative trading venues under UK EMIR and UK MiFIR, with a view to those measures taking effect on or very shortly after a no-deal Brexit. They suggest that HM Treasury could make an equivalence direction under the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 (SI 2019/541) or, alternatively, the FCA could grant transitional relief for this purpose using its temporary transitional powers under Part 7 of the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 (SI 2019/632). They urge HM Treasury and the FCA to indicate the approach that they intend to take as soon as possible.

 

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.

Markets in Financial Instruments Directive II and Markets in Financial Instruments Regulation

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March 10, 2015 – the FCA published an updated timetable relating to the implementation of the Markets in Financial Instruments Directive II (MiFID II”) and Markets in Financial Instruments Regulation (“MiFIR”). The timetable sets out the key dates for the implementation and transposition of the Directive and Regulation into domestic law. The deadline for transposing MiFID II into domestic law is July 3, 2016. MiFID II and MiFIR enter into force on January 3, 2017. The FCA aims to publish its main consultation paper on the implementation of MiFID II and MiFIR in December 2015. The final rules are to be published in June 2016. The FCA’s timetable is available on its dedicated webpage here.