Securities and Markets

Issue 1172 / 11 August 2022

European Commission

CCP Recovery and Resolution - European Commission publishes report on treatment of CCP equity in the write-down and conversion tool - 10 August 2022

The European Commission (the Commission) has published a report (COM(2022)393) sent to the European Parliament and the Council of the EU on the treatment of central counterparty (CCP) equity in the write-down and conversion tool, under the Regulation on the recovery and resolution of central counterparties (CCPs) ((EU) 2021/23) (CCPRRR).

Under Article 27(7) of the CCPRRR, the resolution authority must write down and convert any instruments of ownership, debt instruments and other unsecured liabilities immediately before or together with the application of another resolution tool. This is not required if a different sequence is applied that would minimise deviations from the ‘no creditor worse off’ (NCWO) principle and better achieve the resolution objectives.

The Commission concludes that it cannot at this time make a recommendation on amendments to Article 27(7) because technical work is still ongoing. In particular, further work is needed to ensure that the principle of CCP equity absorbing losses first and being fully loss absorbing in resolution can be applied. There is also limited practical experience as the resolution planning rules of the CCPRRR will only apply from 12 August 2022.

The deadline for the Commission to submit a report on the implementation of the CCPRRR is February 2026.


European Securities and Markets Authority

EMIR - ESMA publishes Memorandum of Understanding with South African authorities - 10 August 2022

The European Securities and Markets Authority (ESMA) has published a Memorandum of Understanding (MoU) it has entered into with South Africa’s Financial Sector Conduct Authority (FSCA), Prudential Authority and the South African Reserve Bank, on the exchange of information regarding central counterparties (CCPs) under the European Market Infrastructure Regulation (648/2012/EU) (EMIR).

The European Commission adopted Commission Implementing Decision (EU) 2022/900 regarding the equivalence of the regulatory framework of South Africa for CCPs under EMIR in June 2022. The MoU will take effect on the date that it is signed by the South African authorities. It will replace the MoU entered into between ESMA and the FSCA (formerly known as the Financial Services Board) in November 2015.

Memorandum of Understanding: European Securities and Markets Authority and the Financial Sector Conduct Authority and the Prudential Authority and the South African Reserve Bank.

UK Jurisdiction Taskforce

Digital securities - UK Jurisdiction Taskforce publishes legal statement for consultation - 3 August 2022

The UK Jurisdiction Taskforce (UKJT) has published a ‘Legal Statement on Digital Securities’ for consultation (the Legal Statement). The Legal Statement follows the UKJT’s November 2018 statement on the status of cryptoassets and smart contracts. In April 2021, the UKJT published its ‘digital dispute resolution rules’ to be incorporated into on-chain digital relationships and smart contracts.

Several jurisdictions have introduced bespoke legislative frameworks to cater for digital securities but no similar framework has been introduced in the UK. The Legal Statement explores the way in which English law can support the issue and transfer of equity or debt securities on blockchain and distributed ledger technology (DLT) systems. It focuses on equity or debt securities constituted or evidenced by reference to a blockchain or distributed ledger rather than conventional securities whose performance is linked to, or which are collateralised by, digital assets. It refers to questions around issuance (for example, whether a blockchain or DLT-based system can be used as a register of digital securities and needs to comply with the requirements of the Uncertificated Securities Regulations 2001); the stapling of rights and interests to digital securities; and transfers (including, whether a transfer must meet the requirements of section 136(1) or section 53(1)(c) of the Law of Property Act 1925). A separate ancillary question relates to corporate requirements for UK companies (for example, whether a blockchain or DLT-based system can serve as a register of members or debenture holders for the purposes of complying with sections 113 and 743 of the Companies Act 2006).

The deadline for responses is 23 September 2022. A sub-committee of the UKJT will prepare the Legal Statement for publication after a public consultation has been held.

UKJT consultation: The issuance and transfer of digital securities under English private law


Press release