Official Journal of the EU (OJ)

European Commission Implementing Regulation Amending Implementing Regulation 2016/2070 Published in the OJ

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The European Commission Implementing Regulation amending Implementing Regulation 2016/2070 in relation to benchmarking portfolios and reporting instructions under the CRD IV Directive (2013/36/EU) (Regulation 2017/1486) was published in the Official Journal of the EU (“OJ“) on August 31, 2017.

The Implementing Regulation 2016/2070 sets out the reporting requirements required from institutions and was published in the OJ in December 2016. The European Banking Authority (“EBA“) and other competent authorities use the information reported to assess the quality of the institutions’ internal approaches under Article 78 of CRD IV.

Pursuant to Article 78(1) of CRD IV, institutions must submit the calculations of their internal approaches at least once a year. Given that the reporting requirements evolve over time in line with the changing focus of the competent authorities’ assessments and EBA Reports, the Commission considered it necessary to amend Annexes I to VI to Implementing Regulation 2016/2070.

The amendments to Implementing Regulation 2016/2070 are limited, and as such, there was no public consultation. The Implementing Regulation will enter into force on September 20, 2017.

European Commission Adopts Delegated Regulation That Supplements the MiFIR on the Treatment of Package Orders

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On August 14, 2017, the European Commission has published the draft text of a Delegated Regulation supplementing the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) with regard to the treatment of package orders.

Currently, Article 9(1)(e) of MiFIR provides that, where certain conditions apply, a waiver is given for both pre- and post-trade transparency requirements for packaged orders. This waiver is, however, limited where the package order is considered “liquid”.

Pursuant to the power of the Commission to adopt a Delegated Regulation establishing a clear methodology for determining package orders for which there is a “liquid market,” the Commission has introduced this Delegated Regulation. Article 1 of the Delegated Regulation sets out general methodology for establishing which for package orders there is a “liquid market.” Articles 2 to 5 then go on to specify the conditions under which a package order can fulfill asset-specific criteria set out in Article 1(b).

Following the introduction of the draft text of the Delegated Regulation, the Council of the EU and European Parliament will consider it. Subject to any objections, it will then enter into force 20 days after its publication in the Official Journal of the EU and apply from January 3, 2018.

To see the draft text of the Delegated Regulation, please click here.

European Commission Adopts Implementing Regulation on Its Own Supervisory Reporting to Reflect IFRS 9 Changes to FINREP

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On July 5, 2017, the European Banking Authority (“EBA“) published a press release announcing that the European Commission (EC) adopted an Implementing Regulation on June 29, 2017, which amends the Implementing Regulation on supervisory reporting of institutions (Regulation 680/2014) under the Capital Requirements Regulation (Regulation 575/2013) (CRR). The text of the Implementing Regulation and its Annexes has been published by the Commission.

The changes relate to the provisions in Regulation 680/2014, which concern financial reporting (“FINREP“) and are intended to align these provisions with International Financial Reporting Standard 9 (IFRS 9). Regulation 680/2014 includes FINREP requirements that are founded on international accounting standards and must be updated in line with any updates made to the relevant accounting standards.

It is now time for the Implementing Regulation to be published in the Official Journal of the EU (OJ). It will apply from March 1, 2018.

European Commission Guidelines on Application of PRIIPS Regulation

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On July 4, 2017, the European Commission adopted a communication containing guidelines on the application of the Regulation on key information documents (“KIDs“) for packaged retail and insurance-based products (“PRIIPS“) (Regulation 1286/2014) (PRIIPS Regulation).

The PRIIPS Regulation lays down rules on the content and format of the KID to be drawn up by PRIIP manufacturers and on the provision of the KID to retail investors and those selling or advising on the products. By smoothing out potential interpretative divergences throughout the EU, the guidelines hope to help providers and distributors of investment products, funds and investment insurance policies design their KIDS. Along with several others, the guidelines address the following issues:

  1. products covered by the PRIIPS Regulation;
  2. products made available to retail investors against no consideration;
  3. multi-option PRIIPS;
  4. insurance-based investment products with PRIIPS and non-PRIIPS as underlying investment options;
  5. territorial application;
  6. use of KIDs by UCITS;
  7. PRIIPS only sold by intermediaries;
  8. distribution of a PRIIP without a KID; and
  9. a non-PRIIP product offered alongside a PRIIP.

The communication was published in the Official Journal of the EU (OJ) on July 7, 2017, as 2017/C 218/02. Firms must comply with the Regulation from January 1, 2018.

Delegated Regulation Further Extending Temporary Clearing Exception for PSAs Under the Regulation on OTC Derivatives, CCPS and Trade Repositories (Regulation 648/2012) EMIR Published in OJ

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An amendment to EMIR entitled Commission Delegated Regulation (EU) 2017/610 was published in the Official Journal of the EU (“OJ“). The Delegated Regulation concerns the extension of transitional periods relating to Pension Scheme Arrangements (“PSAs“) and was adopted by the European Commission on December 20, 2016. The Delegated Regulation came into force the day after it was published in the OJ, being April 1, 2017.

Delegated Acts Under the MiFID II Directive (2014/65/Eu) Published in OJ

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On March 31, 2017, 28 Delegated Regulations supplementing the Markets In Financial Instruments Directive (“MiFID II“) (2014/65/Eu) and the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) were published in the OJ, together with a Delegated Directive supplementing the MiFID. The Delegated Regulations will enter into force 20 days after their publication in the OJ (that is, April 20, 2017). They will apply from January 3, 2018, with the exception of certain provisions in Delegated Regulations 2017/567, 2017/571, 2017/581, 2017/583, 2017/587, 2017/588 and 2017/590.

The Delegated Regulations are:

  1. Commission Delegated Regulation (EU) 2017/565 of April 25, 2016, supplementing MiFID II with regard to organizational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive;
  2. Commission Delegated Regulation (EU) 2017/566 of May 18, 2016, supplementing MiFID II with regard to regulatory technical standards (“RTS“) for the ratio of unexecuted orders to transactions in order to prevent disorderly trading conditions;
  3. Commission Delegated Regulation (EU) 2017/567 of May 18, 2016, supplementing MiFIR with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions;
  4. Commission Delegated Regulation (EU) 2017/568 of May 24, 2016, supplementing MiFID II with regard to RTS for the admission of financial instruments to trading on regulated markets;
  5. Commission Delegated Regulation (EU) 2017/569 of May 24, 2016, supplementing MiFID II with regard to RTS for the suspension and removal of financial instruments from trading;
  6. Commission Delegated Regulation (EU) 2017/570 of May 26, 2016, supplementing MiFID II on markets in financial instruments with regard to RTS for the determination of a material market in terms of liquidity in relation to notifications of a temporary halt in trading;
  7. Commission Delegated Regulation (EU) 2017/571 of June 2, 2016, supplementing MiFID II with regard to RTS on the authorization, organizational requirements and the publication of transactions for data reporting services providers;
  8. Commission Delegated Regulation (EU) 2017/572 of June 2, 2016, supplementing MiFIR with regard to RTS on the specification of the offering of pre- and post-trade data and the level of disaggregation of data;
  9. Commission Delegated Regulation (EU) 2017/573 of June 6, 2016, supplementing MiFID II on markets in financial instruments with regard to RTS on requirements to ensure fair and nondiscriminatory co‑location services and fee structures;
  10. Commission Delegated Regulation (EU) 2017/574 of June 7, 2016, supplementing MiFID II with regard to RTS for the level of accuracy of business clocks;
  11. Commission Delegated Regulation (EU) 2017/575 of June 8, 2016, supplementing MiFID II on markets in financial instruments with regard to RTS concerning the data to be published by execution venues on the quality of execution of transactions;
  12. Commission Delegated Regulation (EU) 2017/576 of June 8, 2016, supplementing MiFID II with regard to RTS for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution;
  13. Commission Delegated Regulation (EU) 2017/577 of June 13, 2016, supplementing MiFIR on markets in financial instruments with regard to RTS on the volume cap mechanism and the provision of information for the purposes of transparency and other calculations;
  14. Commission Delegated Regulation (EU) 2017/578 of June 13, 2016, supplementing MiFID II on markets in financial instruments with regard to RTS specifying the requirements on market making agreements and schemes;
  15. Commission Delegated Regulation (EU) 2017/579 of June 13, 2016, supplementing MiFIR on markets in financial instruments with regard to RTS on the direct, substantial and foreseeable effect of derivative contracts within the Union and the prevention of the evasion of rules and obligations;
  16. Commission Delegated Regulation (EU) 2017/580 of June 24, 2016, supplementing MiFIR with regard to RTS for the maintenance of relevant data relating to orders in financial instruments;
  17. Commission Delegated Regulation (EU) 2017/581 of June 24, 2016, supplementing MiFIR with regard to RTS on clearing access in respect of trading venues and central counterparties;
  18. Commission Delegated Regulation (EU) 2017/582 of June 29, 2016, supplementing MiFIR with regard to RTS specifying the obligation to clear derivatives traded on regulated markets and timing of acceptance for clearing;
  19. Commission Delegated Regulation (EU) 2017/583 of July 14, 2016, supplementing MiFIR on markets in financial instruments with regard to RTS on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives;
  20. Commission Delegated Regulation (EU) 2017/584 of July 14, 2016, supplementing MiFID II with regard to RTS specifying organizational requirements of trading venues;
  21. Commission Delegated Regulation (EU) 2017/585 of July 14, 2016, supplementing MiFIR with regard to RTS for the data standards and formats for financial instrument reference data and technical measures in relation to arrangements to be made by ESMA and competent authorities;
  22. Commission Delegated Regulation (EU) 2017/586 of July 14, 2016, supplementing MiFID II with regard to RTS for the exchange of information between competent authorities when cooperating in supervisory activities, on-the-spot verifications, and investigations;
  23. Commission Delegated Regulation (EU) 2017/587 of July 14, 2016, supplementing MiFIR on markets in financial instruments with regard to RTS on transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internalizer;
  24. Commission Delegated Regulation (EU) 2017/588 of July 14, 2016, supplementing MiFID II with regard to RTS on the tick size regime for shares, depositary receipts, and exchange-traded funds;
  25. Commission Delegated Regulation (EU) 2017/589 of July 19, 2016, supplementing MiFID II with regard to RTS specifying the organizational requirements of investment firms engaged in algorithmic trading;
  26. Commission Delegated Regulation (EU) 2017/590 of July 28, 2016, supplementing MiFIR with regard to RTS for the reporting of transactions to competent authorities;
  27. Commission Delegated Regulation (EU) 2017/591 of December 1, 2016, supplementing MiFID II with regard to RTS for the application of position limits to commodity derivatives; and

Commission Delegated Regulation (EU) 2017/592 of December 1, 2016, supplementing MiFID II with regard to RTS for the criteria to establish when an activity is considered to be ancillary to the main business.

European Commission Adopts Delegated Regulation on RTS for the Application of Position Limits to Commodity Derivatives

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On December 1, 2016, the European Commission adopted a Delegated Regulation supplementing the MiFID II Directive (2014/65/EU) in relation to regulatory standards (“RTS“) for the application of position limits to commodity derivatives (2016) 4362 final).

The MiFID II Directive requires that competent authorities, in line with ESMA’s methodology, establish and apply position limits on the size of a net position a person can hold in certain commodity derivatives and economically equivalent OTC (EEOTC) contracts. Article 57(3) and (12) of the MiFID II Directive empowers ESMA to develop RTS providing the basis of the methodology for the calculation and application of the position limits.

In September 2015, ESMA submitted the draft RTS to the Commission. The Commission then notified ESMA in April 2016 that it intended to endorse the RTS, provided that a number of changes were made. ESMA submitted revised draft RTS to the Commission in May 2016. The Commission explains that the amended provisions create a more stringent regime for liquid contracts whose underlying product is food for human consumption. Further, it caps the upper position for new and illiquid contracts to 40%, but stipulates that upper position limits of up to 50% can be imposed on a temporary basis. The proposed methodology also highlights how competent authorities are to consider volatility when setting position limits.

The Council of the EU and the European Parliament are now to consider the Delegated Regulation. Should neither of them object, it will enter into force 20 days after its publication in the Official Journal of the EU (OJ).

European Commission Adopts Delegated Regulation on RTS on Criteria for Establishing When an Activity Is Considered to Be Ancillary to the Main Business

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The European Commission adopted, on December 1, 2016, a Delegated Regulation supplementing the MiFID II Directive (2014/65/EU) in relation to regulatory technical standards (“RTS“) on the criteria for establishing when an activity is considered to be ancillary to a firm’s main business (C(2016) 7643 final).

The MiFID II Directive exempts persons dealing on their own account, or providing investment services to clients, in commodity derivatives and emission allowances, provided that activity is ancillary to their main business and their main business is not the provision of investment services or banking activities. Article 2(4) of the MiFID II Directive gives the Commission power to adopt RTS specifying the criteria for establishing when an activity is to be considered ancillary to the main business of a group.

ESMA submitted draft RTS to the Commission in September 2015. The Commission notified ESMA in April 2016 that it intended to endorse the draft RTS, subject to several amendments being made. In May 2016, ESMA submitted a formal opinion and a revised draft of the RTS to the Commission.

It is now for the Council of the EU and the European Parliament to consider the Delegated Regulation. Should neither of them object, it will enter into force 20 days after its publication in the Official Journal of the EU (OJ) and will apply from January 3, 2018.

European Commission Adopts Delegated Regulation Amending List of High-Risk Third Countries Under the Fourth Money Laundering Directive

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On November 28, 2016, the Council of the EU published a Commission Delegated Regulation (C(2016) 7495 final) amending Commission Delegated Regulation (EU) 2016/1675 supplementing the Fourth Money Laundering Directive ((EU) 2015/849) (“MLD4“) by identifying high-risk third countries with strategic deficiencies.

The Commission adopted Delegated Regulation (EU) 2016/1675 in July 2016. The Delegated Regulation, for the first time, identified high-risk third countries with strategic anti-money laundering (“AML“) and counter-terrorist financing (“CTF“) deficiencies. The Commission advised at the time that it had taken into account the most recent Financial Action Task Force (“FATF“) public statements and that it would review the list, where appropriate.

The explanatory memorandum to the new Delegated Regulation explains that, as stressed in recital 28 to MLD4, the Commission will adapt its assessment to changes made to information sources from international organizations and standard setters, such as those issued by the FATF. As a consequence, the Commission aims to update the list to reflect the progress, or the lack of progress, made by high-risk third countries in removing the strategic deficiencies.

According to this latest information available to the Commission, it was found that Guyana has made significant progress on AML and CTF matters. On the basis of the progress made, with Guyana substantially completing all the action plan items agreed upon with the FATF, the FATF decided to conduct an on-site visit to Guyana to confirm that implementation had begun and that there is political commitment to continue to strengthen the AML and CTF regime. The FATF on‑site visit concluded that Guyana has a legal and institutional framework in place that addresses the strategic deficiencies of its AML and CTF regime. As a result, the FATF has removed Guyana from its document Improving global AML/CTF compliance: ongoing process.

The Commission’s analysis has similarly concluded that Guyana should no longer be considered to be a third country with strategic AML and CTF deficiencies. As a result, it is removing Guyana from the list of high-risk third countries under MLD4.

The Commission adopted the Delegated Regulation on November 24, 2016. The new Delegated Regulation states that it will enter into force the day after it is published in the Official Journal of the EU (OJ).

European Commission Adopts Delegated Regulation on RTS on Additional Collateral Outflows

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On October 31, 2016, the European Commission adopted a Delegated Regulation supplementing the Capital Requirements Regulation (“CRR“) (Regulation 575/2013) in relation to regulatory technical standards (“RTS“) for additional liquidity outflows corresponding to collateral needs that have resulted from the impact of an adverse market scenario on an institution’s derivatives transactions (C(2016) 6867 final).

In March 2014, the EBA submitted a draft RTS to the European Commission. These proposed to take flows of collateral into account on a gross basis, contrary to the Basel Committee on Banking Supervision’s (“BCBS“) net approach. However, the assessment of the draft RTS was then delayed. The EBA submitted an amended draft RTS to the Commission for endorsement in May 2016. The method of calculation used in the RTS is founded on the historical look‑back approach developed by the BCBS.

The Council of the EU and the European Parliament must now consider the Delegated Regulation. If no objections are raised by either of them, the Delegated Regulation will enter into force 20 days after its publication in the Official Journal of the EU (“OJ“).