regulatory technical standards

European Commission Adopts Delegated Regulations on RTS Relating to Execution Venues under MiFID II

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On June 8, 2016, the European Commission adopted the following two Delegated Regulations supplementing the MiFID II Directive (2014/65/EU):

  1. A Delegated Regulation (C(2016) 3333 final) in relation to regulatory technical standards (RTS) surrounding the data to be published by execution venues on the quality of execution of transactions, together with an Annex. For financial instruments subject to the trading obligation, each trading venue and systematic internalizer must, under MiFID II, make available to the public, at no cost and on at least an annual basis, data relating to the quality of execution of transactions on that venue.
  2. A Delegated Regulation (C(2016) 3337 final) in relation to RTS for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution, together with an Annex. Investment firms that execute client orders must, under MiFID II, summarize and make available annually, the top five execution venues in terms of trading volumes where they executed client orders in the preceding year, and information on the quality of execution obtained.

It is now for the Council of the EU and the European Parliament to consider the Delegated Regulations. Subject to any objection, they shall enter into force 20 days after their publication in the Official Journal of the EU (OJ).

European Commission Adopts Delegated Regulation on RTS on Detailed Records of Financial Contracts under BRRD

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On June 7, 2016, the European Commission adopted a Delegated Regulation supplementing the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD). The Delegated Regulation deals with the regulatory technical standards (RTS) on a minimum set of the information on financial contracts that should be contained in the detailed records, together with the circumstances in which the requirement should be imposed (C(2016) 3356 final).

Following submission of draft RTS by the EBA in December 2015, the Commission is entitled, under Article 71 of the BRRD, to adopt delegated regulations which highlight the methodology for assessing the value of assets and liabilities of institutions or entities. The draft RTS state that, should the relevant conditions for resolution be satisfied, an institution must maintain detailed records of financial contracts where it is foreseen that resolution actions would be applied to the institution concerned. The Annex accompanying the Delegated Regulation highlights the minimum list of information on financial contracts.

It is now for the Council of the EU and the European Parliament to consider the Delegated Regulation. Subject to any objection, it will enter into force 20 days after its publication in the Official Journal of the EU (OJ).

European Commission Adopts MiFIR Delegated Regulation on RTS on Access to Benchmarks

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On June 2, 2016, the European Commission adopted a Delegated Regulation supplementing the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR) with regard to regulatory technical standards (RTS) on access in respect of benchmarks (C(2016) 3203 final).

MiFIR provides for the non-discriminatory access for central counterparties (CCPs) and trading venues to licences of, and information relating to, benchmarks that are used to determine the value of some financial instruments for trading and clearing purposes.

The Delegated Regulation lays down the list of information to be provided to a trading venue or CCP, the conditions under which access must be granted as well as specifications on non-discriminatory treatment. It also sets out the standards for determining how a benchmark can be considered to be new, and hence benefit from transitory arrangements.

Following adoption of the Delegated Regulation by the Commission, it will be considered by the Council of the EU and the European Parliament. If neither of them objects, the Delegated Regulation states that it will enter into force 20 days after its publication in the Official Journal of the EU (OJ) and will apply from the date referred to in the fourth paragraph of Article 55 of MiFIR.

Commission Sends MiFID II Draft RTS Back to ESMA for Revision

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On March 17, Markus Ferber, MEP, the European Parliament’s Rapporteur for MiFID II, published a press release announcing that the European Commission had sent back to European Securities and Markets Authority (“ESMA”) the draft regulatory technical standards (RTS) on non-equity transparency, the ancillary activity exemption, and position limits for commodity derivatives for further revision to take the Parliament’s position more thoroughly into account.

Mr. Ferber explains that the latest draft RTS were not acceptable to the Parliament, especially the position limits regime, which he believes urgently needs a comprehensive redrafting to effectively curb food speculation. He believes that the latest drafts were not up to standard and would not have solved the problem at all.

Mr. Ferber expects ESMA to revisit the technical standards swiftly, thoroughly and to adapt them in line with the Parliament’s remarks. However, the redrafting must not further delay the overall MiFID II timeline. He adds that, since the Parliament’s concerns were known and available for quite some time, the Commission and ESMA could easily have acted earlier.

European Commission Adopts Delegated Regulation on Presentation of Investment Recommendations and Disclosure of Conflict of Interest Under MAR

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The European Commission has adopted a Delegated Regulation supplementing the Market Abuse Regulation (“MAR“) with regard to regulatory technical standards for the technical arrangements for the objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflict of interest (under Article 20).

The Delegated Regulation provides for rules on the identity of producers of recommendation; introduces a general standard on objective presentation of recommendations, applicable to any person mentioned in Article 20(1); sets out requirements on the maintenance of records of all recommendations produced on any issuer or financial instrument and disseminated during the preceding 12-month period and determines the general standards and additional obligations relating to disclosure of interests or of conflicts of interest. It also ensures that recommendations include the date and time on which the recommendation was first disseminated and provides for specific arrangements for dissemination of recommendations, their summary or extract and when recommendations are substantially altered.

Once approved by the Council of the EU and the European Parliament, it is expected that the Delegated Regulation will apply from July 3, 2016. The Delegated Regulation can be found here.

ESAs Publish Final Draft Technical Standards on Margin Requirements for Non-Centrally Cleared Derivatives

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The Joint Committee of the European Supervisory Authorities (EBA, EIOPA, ESMA) (“ESAs“) has published final draft Regulatory Technical Standards (“RTS“) outlining the framework of the European Market Infrastructure Regulation (EMIR). The RTS cover the risk mitigation techniques related to the exchange of collateral to cover exposures arising from non-centrally cleared OTC derivatives. They also specify the criteria concerning intragroup exemptions and the definitions of practical and legal impediments to the prompt transfer of funds between counterparties.

The draft RTS prescribe that, for OTC derivatives not cleared by a Central Counterparty, counterparties have to exchange both initial and variation margins. This will reduce counterparty credit risk, mitigate any potential systemic risk and ensure alignment with international standards. The draft RTS outline the list of eligible collateral for the exchange of margins, the criteria to ensure the collateral is sufficiently diversified and not subject to wrong-way risk, as well as the methods to determine appropriate collateral haircuts. The draft RTS also lay down the operational procedures relating to documentation, legal assessments of the enforceability of the agreements and the timing of the collateral exchange, as well as the procedures for counterparties and competent authorities related to the treatment of intragroup derivative contracts.

ESMA Publishes Responses to Consultations on MAR

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On October 17, the European Securities and Markets Authority (ESMA) published responses that it received to consultations published in July 2014 relating to the Market Abuse Regulation (Regulation 596/2014) (MAR) on: (i) draft technical advice on possible delegated acts concerning MAR; and (ii) draft regulatory technical standards (RTS) and implementing technical standards (ITS) on MAR.  Response.

ESMA Final Draft RTS for Central Clearing of Interest Rate Swaps under EMIR

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On October 2, the European Securities and Markets Authority (ESMA) published a report containing final draft regulatory technical standards (RTS) for the central clearing of interest rate swaps (IRS) under EMIR. The four IRS classes that will be subject to central clearing are basis swaps, fixed-to-float swaps, forward rate agreements and overnight index swaps, each denominated in a range of currencies.  Report.

The EBA Publishes Updates on the Bank Recovery and Resolution Directive

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On October 3, the European Banking Authority (EBA) published a consultation paper on draft regulatory technical standards (RTS), implementing technical standards (ITS) and guidelines relating to group financial support under the Bank Recovery and Resolution Directive (BRRD). Under the BRRD, a number of conditions must be satisfied to permit one group entity to provide financial support to another group entity that meets the conditions for early intervention under the BRRD. The EBA is required to produce draft RTS and guidelines specifying these conditions. The deadline for comments on the consultation is January 4, 2015.

On October 1, the EBA published a consultation paper on draft guidelines on the interrelationship between the sequence of write-down and conversion of liabilities when the bail-in power under the BRRD is used and the hierarchy of capital instruments in the Capital Requirements Regulation. The deadline for comments on the consultation is January 3, 2015. Consultation Paper. Consultation Paper.

EBA Publishes Final Draft Technical Standards and Guidelines for G-SIIs

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On June 5, the European Banking Authority (EBA) published final draft regulatory technical standards (RTS) and implementing technical standards (ITS) relating to global systemically important institutions (G-SIIs).

The RTS and ITS relate to the requirements in the CRD IV Directive (2013/36/EU) and the Capital Requirements Regulation (Regulation 575/2013) (CRR) concerning G-SIIs. Broadly, CRD IV requires that institutions designated as G-SIIs meet higher capital standards to reflect the potential impact their failure could have on the global financial system. Designation of GSIIs is expected to take place in January 2015, with the enhanced capital requirements becoming mandatory the following year.  RTS.  ITS.