Securities and Markets

Issue 1156 / 21 April 2022

European Commission

Liquidity thresholds and trade percentiles determining SSTI under MiFIR - Commission Delegated Regulation (EU) 2022/629 amending RTS published in OJ - 13 April 2022

Commission Delegated Regulation (EU) 2022/629 has been published in the Official Journal of the European Union. The Delegated Regulation amends the regulatory technical standards (RTS) laid down in Delegated Regulation (EU) 2017/583 on the adjustment of liquidity thresholds and trade percentiles used to determine the ‘size specific to the instrument’ (SSTI) that applies to certain non-equity instruments (RTS 2). This is relevant to the application of transparency waivers and deferrals under the Markets in Financial Instruments Regulation (600/2014/EU) (MiFIR).

RTS 2 allows for the annual phase-in of application of certain transparency thresholds to bonds, structured finance products, emission allowances and derivatives over the course of 4 years, starting from 2019. The phase-in allows gradual broadening of the application of corresponding transparency obligations, and the appropriateness of moving to the next stage is assessed annually. Following an assessment from ESMA, the Commission considers that it is appropriate to move to stage S3 from the current stage S2, and RTS 2 is amended accordingly.

The European Commission adopted the Commission Delegated Regulation in January 2022. It will enter into force on 3 May 2022.

Commission Delegated Regulation (EU) 2022/629 of 12 January 2022 amending the regulatory technical standards laid down in Delegated Regulation (EU) 2017/583 as regards adjustment the liquidity thresholds and trade percentile used to determine the size specific to the instrument applicable to certain non-equity instruments

European Securities and Markets Authority

MiFID II and IDD - ESMA responds to European Commission’s consultation on retail investor suitability and appropriateness assessments - 19 April 2022

The European Securities and Markets Authority (ESMA) has published a letter responding to the European Commission’s (the Commission’s) consultation on options to enhance the suitability and appropriateness assessments for retail investors under the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II) and the Insurance Distribution Directive ((EU) 2016/97) (IDD), published in February 2022.

In the letter, ESMA observes that the Commission’s proposal to apply a unique and standardised retail investor regime that no longer differentiates among the various investment services “might raise questions of whether a ‘one size fits all’ approach can effectively serve different types of retail investors and situations”. ESMA notes that the design of a new standardised regime “needs to fully take into account the needs of the different kinds of investors and safeguard the principle of proportionality”.

ESMA also indicates that the Commission’s proposals would have significant impacts on the current model for the provision of services. If the new framework were to be adopted, ESMA sets out that “sufficient guidance and information” would need to be provided to clients to help them understand and adapt to this change as well as sufficient time to allow firms to implement the new rules (which appear to require significant IT changes).

ESMA notes that the Commission’s proposals imply willingness of retail clients to share their personal investor data in full. In light of this, ESMA cautions that clients have shown recent resistance to sharing personal information due to factors including “cultural ones, lack of trust and fear of cyber risks”. ESMA believes that the Commission should take these concerns into account and, if it decides to proceed with its proposal, further consider General Data Protection Regulation ((EU) 2016/679) (GDPR) implications.

ESMA also cautions that if MiFID II and IDD instruments are to be assessed jointly for the suitability assessment, it would be “essential” to ensure alignment of other relevant requirements. For example, disclosure of information on costs and charges and reporting requirements on the depreciation of a client’s portfolio.

ESMA letter to European Commission: Consultation on options to enhance the suitability and appropriateness assessments (ESMA35-43-3112)

Financial Conduct Authority

Credit rating agencies - FCA updates webpage and releases Central Repository Statistics platform - 19 April 2022

The FCA has updated its webpage on credit rating agencies (CRAs) to explain how to access CRA information, as well as individual credit ratings data, on its Public Ratings Database.

The FCA has also released a Central Repository Statistic platform (CERES). Users are able to view and download ratings statistics based on defined search criteria, using ratings data provided to the FCA by regulated CRAs. The CERES’ associated “General Principles” document highlights that the CERES was established under Article 11 of the retained EU law version of the CRA Regulation (1060/1009/EC) to:

  • provide transparency and contribute to investor protection by providing information on historical performance of credit ratings, including rating transitions and default statistics for a CRA;
  • make the data available in a standardised and consistent format to enable users to compare performance across CRAs; and
  • enable public access to the data so that users can leverage this reduced cost of information for conducting detailed analyses of a CRA’s performance.

Credit Ratings Statistics - Central Repository Statistics (CERES Statistics)

Central Repository Statistic (CERES): General Principles