International Organization of Securities Commissions
Operational resilience during COVID-19 - IOSCO publishes Final Report (FR06/22) - 11 July 2022
The International Organization of Securities Commissions (IOSCO) has published its Final Report (FR06/22) on the operational resilience of trading venues and market intermediaries (together, ‘regulated entities’) during the COVID-19 pandemic and lessons for future disruptions (the Report).
IOSCO observes that regulated entities have largely proved to be operationally resilient during the pandemic, and have continued to serve clients and the broader economy despite periods of market volatility and record trading volumes. However, IOSCO highlights a number of lessons from the pandemic, including that:
- the operational resilience of a regulated entity depends as much on the regulated entity’s processes, premises and personnel as its technology when faced with significant disruption;
- greater automation and less dependence on physical documents and manual processes by regulated entities may better accommodate a remote workforce. A review of monitoring and supervision arrangements by regulated entities for remote workforces may be appropriate to help ensure continued effectiveness in a remote or hybrid environment; and
- decentralised and remote work may increase the importance of monitoring processes to help ensure information security and prevent cyber-attacks.
IOSCO Final Report: Operational resilience of trading venues and market intermediaries during the COVID-19 pandemic & lessons for future disruptions (FR06/22)
International Organization of Securities Commissions and Committee on Payments and Market Infrastructures
Stablecoin arrangements - CPMI and IOSCO publish joint guidance on application of the Principles for Financial Market Infrastructures - 13 July 2022
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have published joint guidance confirming the application of the Principles for Financial Market Infrastructures (FMIs) (PFMI) to systemically important stablecoin arrangements (SA) that transfer stablecoins (the Guidance). The Guidance follows the CPMI/IOSCO joint consultative report published in October 2021, and is a ‘major step forward’ in applying ‘same risk, same regulation’ to stablecoins, and extending international standards for payment, clearing and settlement systems to cover systemically important SAs.
Overall, the Guidance highlights that the transfer function of an SA is comparable to that performed by other types of FMI. An SA that performs this transfer function is therefore considered an FMI for the purpose of applying the PFMI and, if determined by relevant authorities to be systemically important, the SA as a whole would be expected to observe all relevant principles in the PFMI. The Guidance provides considerations to assist authorities in determining whether an SA is systemically important and, given the novelty and complexity of stablecoin arrangements, the guidance elaborates aspects related to: (i) governance; (ii) framework for the comprehensive management of risks; (iii) settlement finality and (iv) money settlements.
The CPMI and IOSCO will continue to examine regulatory, supervisory and oversight issues associated with stablecoin arrangements and coordinate with other standard-setting bodies.
CPMI/IOSCO Guidance: Application of the Principles for Financial Market Infrastructures to stablecoin arrangements
Webpage
Press release
European Securities and Markets Authority
Russian invasion of Ukraine - ESMA publishes statement on prospectus supervision - 7 July 2022
The European Securities and Markets Authority (ESMA) has published a statement on impact of the EU sanctions regime on prospectus supervision in the context of Russia’s invasion of Ukraine. ESMA’s statement explains that infringements of EU sanctions can constitute sufficient legal basis for a national competent authority (NCA) to refuse the approval of a prospectus.
Against this backdrop, issuers submitting a prospectus to a national competent authority (NCA) should be aware that they may receive questions and/or requests for additional documentation from NCAs concerning the areas and parties identified by EU sanctions. These questions or requests for additional information may occur when the prospectus is first submitted or at any time during the scrutiny and approval process.
ESMA Statement: Prospectus supervision in the context of EU sanctions connected to Russia’s invasion of Ukraine (ESMA32-384-5422)
Press release
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EMIR - ESMA publishes statement on third country CCP recognition decisions - 8 July 2022
The European Securities and Markets Authority (ESMA) has published a statement in relation to third country central counterparties (CCPs) whose applications for recognition under the European Market Infrastructure Regulation (648/2012/EU) (EMIR) were suspended until 28 June 2022.
ESMA has started processing applications for third country CCPs that are established in jurisdictions for which the European Commission (the Commission) has recently adopted equivalence decisions, such as Chile, China, Indonesia, Israel and Malaysia.
At the same time, ESMA will now start the process for refusing recognition for third country CCPs that are established in jurisdictions for which the Commission did not adopt equivalence decisions by 28 June 2022. These include Argentina, Colombia, Russia, Taiwan, Thailand and Turkey. ESMA is ready to reassess the applications should there be further developments regarding the relevant equivalence decisions during the processing period.
Until ESMA has taken a decision on granting or refusing a recognition under EMIR, a third country CCP who had applied under the EMIR transition provisions and currently provides clearing services in a Member State under national law, may continue to provide clearing services in that Member State. ESMA has published a list of recognised third country CCPs and third country CCPs who have applied for recognition on its website.
Press release
Benchmarks Regulation - ESMA publishes consultation paper on RTS on form and content of application for recognition - 8 July 2022
The European Securities and Markets Authority has published a consultation paper on amendments to the regulatory technical standards (RTS) set out in Commission Delegated Regulation (EU) 2018/1645 supplementing the Benchmarks Regulation ((EU) 2016/1011) (BMR). The proposed amendments to the RTS, which date from March 2017, cover the form and content of an application for recognition under the BMR.
ESMA explains that the proposed changes aim to align the information provided in a recognition application with the changes introduced to the BMR recognition regime in 2019. ESMA is also taking this opportunity to review the RTS more substantially in order to address shortcomings identified by the experiences of national competent authorities in recognising and supervising third country administrators.
The deadline for responses is 9 September 2022. ESMA expects to publish a final report and submission of the draft RTS to the European Commission for endorsement in Q4 2022.
ESMA Consultation Paper: Review of the RTS on the form and content of an application for recognition under the Benchmarks Regulation (ESMA81-393-494)
Webpage
Press release
EMIR and MiFIR - ESMA publishes consultation paper on RTS on the CO and DTO - 11 July 2022
The European Securities and Markets Authority (ESMA) has published a consultation paper proposing draft regulatory technical standards (RTS) that would amend the RTS on the clearing obligation (CO) and on the derivative trading obligation (DTO) under Article 5(2) of EMIR and Article 32 of the Markets in Financial Instruments Regulation (600/2014/EU) (MiFIR), respectively.
The proposals contained in the consultation, which are based on the progress made with the benchmark transition away from the Euro Overnight Index Average (EONIA) and the London Interbank Offered Rate (LIBOR) in the interest rate derivative market, introduce additional classes to the scope of the CO and of the DTO.
The deadline for responses is 30 September 2022. ESMA will finalise the draft RTS by end-2022 and submit them to the European Commission for endorsement in the form of draft Commission Delegated Regulations.
ESMA Consultation Paper: On the clearing and derivative trading obligations in view of the 2022 status of the benchmark transition (ESMA70-446-369)
Webpage
Press release
CSDR - ESMA publishes consultation paper on amendment to cash penalty process for cleared transactions - 11 July 2022
The European Securities and Markets Authority has published a consultation paper on amendments to Article 19 of the regulatory technical standards (RTS) on settlement discipline in Commission Delegated Regulation (EU) 2018/1229 (the Delegated Regulation), which supplements the Central Securities Depositories Regulation (909/2014/EU) (CSDR).
The consultation paper seeks stakeholder views on simplifying the process of collection and distribution of cash penalties for settlement fails relating to cleared transactions. In sum, ESMA’s proposals would change the existing practice by allowing the central securities depositories (CSD) to collect and distribute all types of penalties, including those for settlement fails relating to cleared transactions. Currently, central counterparties (CCPs) are responsible for the collection and distribution of cash penalties for settlement fails on cleared transactions.
The deadline for responses is 9 September 2022. ESMA aims to publish its final report containing the amending RTS by Q4 2022. ESMA suggests that the amending RTS should apply six months after their publication in the Official Journal of the European Union.
ESMA Consultation Paper: Amendment of Article 19 of CSDR RTS on Settlement Discipline (ESMA70-450-1173)
Press release
Prudential Regulation Authority and Financial Conduct Authority
UK EMIR - PRA and FCA publish joint consultation paper on margin requirements for non-centrally cleared derivatives - 12 July 2022
The PRA and FCA have published a joint consultation paper (CP11/22 and CP22/13 respectively) on the margin requirements for non-centrally cleared derivatives under the onshored version of the European Market Infrastructure Regulation (648/2012/EU) (UK EMIR), amending the binding technical standards (BTS) in the UK onshored version of Commission Delegated Regulation (EU) 2016/2251.
The three proposals put forward in the consultation paper aim to address issues previously raised by industry, while maintaining strong margin requirements for non-centrally cleared derivatives. These are:
- expanding the list of instruments eligible as collateral when exchanging initial margin to include some third-country funds (including European Economic Area (EEA) Undertakings for Collective Investment in Transferable Securities (UCITS)), provided certain criteria are met;
- introducing a six-month fall-back transitional provision in certain circumstances where the margin rules would otherwise apply to firms immediately to allow firms to establish margin arrangements; and
- amending the definition of central counterparties (CCPs) to correctly refer to their regulatory status.
The consultation closes on 12 October 2022.
Consultation Paper
FCA website
Draft PRA Standards Instrument: The Technical Standards (Bilateral Margining) Instrument 2022
Draft FCA Standards Instrument: The Technical Standards (Bilateral Margining) Instrument 2022
