European Commission
Equivalence of China and Israel under EMIR - Two Commission Implementing Decisions published in OJ - 24 June 2022
Commission Implementing Decision (EU) 2022/984 and Commission Implementing Decision (EU) 2022/985 on the equivalence of the regulatory frameworks for central counterparties (CCPs) in China and Israel, respectively, to the requirements of the European Market Infrastructure Regulation (648/2012/EU) (EMIR), have been published in the Official Journal of the European Union.
The Commission Implementing Decisions allow CCPs in these jurisdictions to apply for recognition by the European Securities and Markets Authority (ESMA). Once recognised, they will be able to provide central clearing services in the EU to EU clearing members and trading venues.
The European Commission adopted the Commission Implementing Decisions on 22 June 2022. They will enter into force on 14 July 2022.
Commission Implementing Decision (EU) 2022/984 of 22 June 2022 on the equivalence of the regulatory framework of the People’s Republic of China for central counterparties that are authorised to clear OTC derivatives in the interbank market and supervised by the People’s Bank of China to the requirements of Regulation (EU) No 648/2012 of the European Parliament and of the Council
Commission Implementing Decision (EU) 2022/985 of 22 June 2022 on the equivalence of the regulatory framework for central counterparties in Israel to the requirements of Regulation (EU) No 648/2012 of the European Parliament and of the Council
PRIIPs KID - Commission Delegated Regulation on extension of transitional arrangements published in OJ - 24 June 2022
Commission Delegated Regulation (EU) 2022/975 amending the regulatory technical standards (RTS) laid down in Commission Delegated Regulation (EU) 2017/653 on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs KID Delegated Regulation), has been published in the Official Journal of the European Union.
The amendments concern the extension of transitional arrangements in article 14(2) of the PRIIPs KID Delegated Regulation and amend the RTS laid down in Commission Delegated Regulation (EU) 2021/2268 regarding the date of application of the PRIIPs KID Delegated Regulation. The Commission Delegated Regulation aligns the application deadline in article 18(3) of the PRIIPs KID Delegated Regulation with the end of the transitional exemption laid down in article 32 of the PRIIPs Regulation (1286/2014/EU), that is, 1 January 2023.
The European Commission adopted the Commission Delegated Regulation in March 2022. It will enter into force on 14 July 2022.
Commission Delegated Regulation (EU) 2022/975 of 17 March 2022 amending the regulatory technical standards laid down in Delegated Regulation (EU) 2017/653 as regards the extension of the transitional arrangement laid down in Article 14(2) of that Regulation and amending the regulatory technical standards laid down in Delegated Regulation (EU) 2021/2268 as regards the date of application of that Regulation
European Commission: Statement
European Supervisory Authorities: Press release
European Parliament
MiFID II - European Parliament publishes motion for a resolution to object to Delegated Regulation on commodity derivatives - 30 June 2022
The European Parliament has published a motion for a resolution to object to the European Commission’s (the Commission) Delegated Regulation (C(2022) 2314 final) supplementing the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II) in relation to regulatory technical standards (RTS) for the application of position limits to commodity derivatives and procedures for applying for exemption from position limits (the Delegated Regulation).
The motion instructs the President of the European Parliament to forward the resolution to the Commission and notify it that the Delegated Regulation cannot enter into force.
The European Parliament also:
- calls on the Commission and the European Securities and Markets Authority (ESMA) to fully evaluate the role and extent of speculation in the determination of commodities prices and raw materials. It emphasises the need to urgently enhance financial transparency of the market trading of commodities, especially for food, energy and raw materials for fertilisers against insider dealing, market manipulation and price distortions, by strengthening reporting requirements through pubic registers of activities of market dealers, brokers and traders;
- calls on the Commission to submit a new delegated act which takes account of the concerns expressed in the resolution; and
- instructs its President to forward the resolution to the Council of the EU and the governments and parliaments of EU member states.
European Parliament Motion for a Resolution: on the Commission delegated regulation of 20 April 2022 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the application of position limits to commodity derivatives and procedures for applying for exemption from position limits (B9-0345/2022)
European Securities and Markets Authority
MiFID II and MiFIR - ESMA announces it will not publish systematic internaliser regime data for non-equity instruments other than bonds and CTP data - 28 June 2022
The European Securities and Markets Authority (ESMA) has published a statement announcing that it will not publish the 1 August 2022 systematic internaliser (SI) regime data for non-equity instruments other than bonds or the consolidated tape (CTP) data, under the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II) and the Markets in Financial Instruments Regulation (600/2014/EU) (MiFIR). Operational constraints have prevented ESMA from performing the scheduled calculations.
ESMA explains that, in light of this, the mandatory SI regime will not apply from 15 August 2022 to 14 November 2022, and investment firms will not need to perform the SI-test for non-equity instruments other than bonds. However, it notes that investment firms can continue to opt into the SI-regime in the interim period. ESMA also highlights that the SI-calculations for non-equity instruments other than bonds will resume on 1 November 2022, based on an observation period from 1 April 2022 to 30 September 2022, and investment firms will be required to perform the SI determination by 15 November 2022. The publication of the SI-data for equity, equity-like instruments and bonds will not be affected and will be made available by 1 August 2022, as planned. ESMA reminds investment firms that they are required to perform the SI-test for those asset classes and comply with the related obligations by 15 August 2022.
ESMA notes that the CTP calculations will resume at the next regular publication date on 1 February 2023, based on an observation period from 1 July 2022 to 31 December 2022. ESMA reminds reporting entities of their obligations to continue reporting transparency data to ensure that it covers the trading activity necessary for subsequent transparency calculations.
ESMA Statement: ESMA will not publish August systematic internaliser regime data for non-equity instruments other than bonds and CTP data
Bank of England
Non-UK central counterparties - The Bank of England publishes Policy Statement and Statement of Policy - 30 June 2022
The Bank of England (the Bank) has published a Policy Statement and a Statement of Policy on its approach on its approach to tiering incoming central counterparties (CCPs) under article 25 of the onshored version of the European Market Infrastructure Regulation ((EU) 648/2021) (UK EMIR).
Under UK EMIR, the BoE is required to "tier" incoming CCPs based on the degree to which they pose, or may pose, risks to UK financial stability. An incoming CCP that is designated Tier 2 (broadly, where it is systemically important for the financial stability of the UK) will be subject to direct UK supervision and regulation. An incoming CCP designated Tier 1 will be primarily supervised and regulated by its home authority.
Under the BoE’s tiering approach set out in the Statement of Policy an incoming CCP will be triaged against the following indicators. Whether it:
- holds at least £10bn of UK clearing member initial margin;
- holds at least £1bn of UK clearing member default fund contributions; and
- has an interoperability arrangement in place with a UK CCP.
Incoming CCPs not meeting these indicators will be designated as Tier 1.
For incoming CCPs that meet one or both of the first two criteria, but not the interoperability criterion, the Bank will assess the proportion of total initial margin and default fund contributions attributable to UK clearing members (the proportionality test). Where both of these are below 20%, the BoE will undertake a Level 1 informed reliance assessment to determine if it can rely on the incoming CCP's home authority’s supervision.
Incoming CCPs that are below the proportionality test thresholds and where Level 1 informed reliance assessment expectations are met will be designated as Tier 1. For the remainder, the BoE will undertake a systemic risk assessment. Incoming CCPs determined to be not potentially systemic to UK financial stability will be designated Tier 1. For CCPs found to be potentially systemic to UK financial stability, the Bank will perform a Level 2 informed reliance assessment. Where the Bank’s expectations are met, the incoming CCP will usually be designated as Tier 1. Otherwise, the incoming CCP will usually be designated as Tier 2.
The implementation date for the final policy is 1 December 2022.
Policy Statement: The Bank of England’s approach to tiering incoming central counterparties under EMIR Article 25
Statement of Policy
Webpage
Policy Statement: The Bank of England’s approach to comparable compliance under EMIR Article 25a
Statement of Policy
Webpage
Press release
Financial Conduct Authority
LIBOR transition - FCA publishes Consultation Paper (CP22/11) - 30 June 2022
The FCA has published a Consultation Paper (CP22/11) seeking views on retiring the 1-month, 3-month and 6-month synthetic sterling London Interbank Offered Rate (LIBOR) settings, as well on market participants’ exposure to US dollar LIBOR. The Consultation Paper follows the FCA’s overview of the status of LIBOR transition, published in January 2022, when the publication of most LIBOR settings ceased, as well as its February 2022 statement on finalising LIBOR transition.
One, three and six-month sterling LIBOR settings:
The FCA is seeking views on ceasing the requirement to continue publication of the one-month and six-month synthetic sterling LIBOR settings at the end of March 2023, rather than the end of December 2022. The FCA suggests that the 1-month and 6-month synthetic sterling LIBOR settings could be retired without prohibitive disruption. However, it notes that the position for 3-month synthetic sterling LIBOR is less clear given its use in mortgages. The FCA recognises the potential difficulties converting mortgages where lenders require active consent from retail borrowers, who may not be familiar with LIBOR transition and may be reluctant to respond to lenders’ letters and communications.
US dollar LIBOR settings:
Five US dollar LIBOR settings will continue to be calculated using panel bank submissions until end-June 2023, when the US dollar LIBOR panel will end (namely, overnight, one, three, six, and 12 months). The FCA is seeking views on the size and nature of remaining exposures where transition is not already provided for either by contract or legislation, and market participants’ plans to transition these exposures before the end of June 2023. The FCA is also seeking views on any challenges or issues that might result from the publication of any US dollar LIBOR settings on a synthetic basis and will consider the case for requiring continued publication on a synthetic basis of the one, three and six-month US dollar LIBOR settings. However, it cautions that market participants should not rely on US dollar LIBOR being available on a synthetic basis after 30 June 2023.
The deadline for responses is 24 August 2022. Later in 2022, the FCA will review its decisions to compel continued publication of the 1-month, 3-month and 6-month sterling LIBOR settings and notify the market out the outcome. The FCA reminds market participants that the synthetic Japanese yen LIBOR settings will cease at end-2022.
FCA Consultation Paper: Winding down ‘synthetic’ sterling LIBOR and US dollar LIBOR (CP22/11)
Webpage
Updated webpage: Benchmarks Regulation: our powers, policy and decision-making
Financial Markets Standards Board
FICC markets - FMSB publishes statement of good practice on trading platform disclosures - 28 June 2022
The Financial Markets Standards Board (FMSB) has published a final statement of good practice for trading platform disclosures, following its December 2021 consultation. The statement provides practical guidance for fixed income, currency and commodities (FICC) market participants on the disclosure that platform operators should provide to their participants.
The statement of good practice calls for platform arrangements to contain information about: (i) trading protocols; (ii) counterparty name disclosure; (iii) prioritisation; (iv) the use of ‘Last Look’; and (v) trade dispute resolution. The statement also covers the potential obligations on platform participants across systems and risk controls, and to provide information on the personnel authorised to access the relevant trading platform. Outages are also examined in the statement, and the FMSB encourages platform operators to consider the appropriateness of providing additional disclosures at the point of trading halt, relating to: (i) when trading is expected to resume; (ii) the status of orders or quotes on the resumption of trading; and (iii) information regarding the cause of trading cessation.
Statements of good practice do not form part of, and are distinct from, FMSB standards, with which all members are expected to comply.
FMSB: Statement of Good Practice for Trading Platform Disclosures
Press release
