Securities and Markets

FR1197 / 9 March 2023

European Parliament

Proposed CSDR Refit Regulation - ECON publishes report - 8 March 2023

The European Parliament’s Economic and Monetary Affairs Committee (ECON) has published a report, dated 6 March 2023, on a proposed Regulation amending the Central Securities Depositories Regulation (909/2014/EU). ECON voted to adopt this report at its meeting on 1 March 2023, as reported in the previous edition of this Bulletin.

ECON made a number of changes to the proposals, including:

  • applying deterrent and proportionate cash penalties when a party to a transaction does not deliver security or funds on time;
  • applying mandatory buy-in rules only as a last resort measure;
  • excluding transactions that fail for reasons not yet attributable to the participants, transactions that do not involve two trading parties or transactions that could lead to detrimental consequences for the market;
  • extending the recognition regime for central securities depositories (CSDs) established in a third country to cover securities settlement services; and
  • ensuring that CSDs that are not authorised as banks are able to offer a sufficient amount of foreign currency settlement through a bank account, subject to risk mitigating requirements to be drafted by the European Banking Authority.

Report on the proposal for a Regulation amending Regulation (EU) No. 909/2014 as regards settlement discipline, cross-border provision of services, supervisory cooperation, provision of banking-type ancillary services and requirements for third-country central securities depositories

Agency for the Cooperation of Energy Regulators and European Securities and Markets Authority 

Wholesale energy markets - ACER and ESMA agree MoU - 6 March 2023

The Agency for the Cooperation of Energy Regulators (ACER) and the European Securities and Markets Authority (ESMA) have signed a Memorandum of Understanding (MoU).

The MoU is a statement of intent to consult, cooperate and exchange information in connection with the statutory responsibilities of ACER and ESMA in relation to wholesale energy markets, which encompasses both commodity and derivative markets. ACER and ESMA anticipate that cooperation will primarily be achieved through on-going consultations, exchange of information and participation in ACER and ESMA working group and task force meetings.

The MoU incorporates new cooperation areas under the Council Regulation (EU) 2022/2578 relating to:

  • the market correction mechanism, which aims to protect EU citizens and the economy from excessively high prices and has applied since 15 February 2023; and
  • Liquified Natural Gas price assessments and benchmarks administered by ACER, and other benchmarks within the scope of the Benchmark Regulation ((EU) 2016/1011).

It also details the role and current tasks of the ACER ESMA Task Force, established in October 2022, which include working to further improve information exchange within energy markets and avoid potential market abuse in Europe’s spot and derivatives markets.

The updated MoU will replace the bodies’ first MoU signed in July 2013.

Memorandum of Understanding concerning the consultation and cooperation regarding statutory responsibilities in relation to EU wholesale energy markets

Press release

Financial Markets Law Committee

Short Selling Regulation - FMLC publishes response to HM Treasury - 8 March 2023

The Financial Markets Law Committee (FMLC) has published a letter sent to HM Treasury, dated 3 March 2023, in response to the Treasury’s call for evidence on the UK Short Selling Regulation (2012/236) (UK SSR). The call for evidence was published as part of the Edinburgh Reforms in December 2022. 

In its response, the FMLC has outlined a number of issues of legal uncertainty with the current regime, recommending changes for HM Treasury to consider as part of its review. These include:

  • Emergency intervention powers: the FMLC notes that if HM Treasury chooses to retain the FCA’s emergency intervention powers in any revised version of the UK SSR, the operation of these powers and the scope of any ban enacted should be clear from the outset. The FMLC recommends that the UK SSR should require the FCA, when exercising any emergency intervention powers, to clearly describe the scope of the ban, including its impact on long positions, derivatives and the rolling of existing positions;
  • Disclosures concerning percentage of issued share capital: the UK SSR requires persons to disclose publicly net short positions which exceed the relevant limit expressed as a percentage of issued share capital. If HM Treasury decide to retain the requirement for persons to publicly or privately disclose this information, the FMLC recommends that the FCA should either be required to maintain a source of this information or provide a list of sources. This would provide firms with certainty as to which figure they should use for disclosures; and
  • Determination of a notifiable position in shares: the FMLC states that certain shares are exempt from the UK SRR notification and disclosure requirements if their principal venue for trading is located outside the UK. The FCA is only required to update its list of exempted shares every two years, which creates uncertainty for firms. The FMLC recommends that either the FCA is required to update the list of exempted shares regularly or firms are permitted to make their own determination about whether a share's principal venue for trading is located outside the UK without being required to refer to the list. Another option might be for the FCA to publish and maintain a list of all in-scope shares, rather than an exempt list.

FMLC Letter to HM Treasury