Bank for International Settlements and International Organization of Securities Commissions
CCP default management auctions - CPMI and IOSCO publish report on issues for consideration - June 2020
The Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have published a report on default management auction processes. This follows a CPMI and IOSCO Discussion Paper on this topic, published in June 2019. A default management auction is one of the tools that a central counterparty (CCP) may use to transfer a defaulting participant’s positions to non-defaulting participant(s), thereby restoring the CCP to a matched book.
CPMI and IOSCO state that they will work with the industry to progress some issues related to CCP default management auctions over the next 24 months.
CPMI and IOSCO report on CCP default management auctions
Report cover note
Press release
International Organization of Securities Commissions
Processes for deference - IOSCO publishes good practice guidance - 26 June 2020
IOSCO has published a report containing good practice guidance on processes for deference. Deference processes allow financial regulators to rely on determinations by other regulators to regulate and supervise market participants, and help reduce potentially duplicative or conflicting regulations. The guidance aims to assist regulators in mitigating the risk of unintended, regulatory-driven market fragmentation and to strengthen international cooperation.
IOSCO report containing good practice guidance on deference processes
Press release
European Systemic Risk Board
EMIR - ESRB publishes Opinion on ESMA’s consultation on central clearing solutions for PSAs - June 2020
The European Systemic Risk Board (ESRB) has published an Opinion, dated 12 June 2020, on the European Securities and Markets Authority’s (ESMA’s) consultation on clearing solutions for pensions scheme arrangements (PSAs) under the European Market Infrastructure Regulation (648/2012/EU) (EMIR). ESMA’s consultation, published in April 2020, focused on the issues faced by PSAs in clearing their contracts.
The ESRB’s Opinion addresses the likelihood of PSAs accessing CCPs as direct members, increased risk for CCPs in intermediating repos and potential solutions involving central bank access. In particular, the ESRB states that it is unlikely that PSAs will become direct clearing members of CCPs as clearing members provide their clients with a wide range of ancillary services on top of the core clearing services, including the funding of cash margins and collateral transformation services and the provision of vital operational support. The ESRB concludes that the best way to remove obstacles for PSAs is to promote indirect clearing.
ESRB Opinion on ESMA’s consultation on central clearing solutions for PSAs under EMIR
EMIR Refit - ESRB publishes Opinion on ESMA’s consultation on post-trade risk reduction services - June 2020
The ESRB has published an Opinion, dated 12 June 2020, on ESMA's consultation on whether trades which directly result from post-trade risk reduction services (PTRRS), including portfolio compression, should be exempted from the clearing obligation under the EMIR Refit Regulation (EU) 2019/834. ESMA’s consultation, published in March 2020, sought feedback on several issues, including: (i) how the clearing obligation affects PTRRS; (ii) whether there should be an exemption from the clearing obligation for trades directly resulting from PTRRS; and (iii) the scope of such an exemption, including whether an exemption should be subject to conditions or restrictions.
Among other things, the ESRB concludes that, while the use of PTRRS can help to reduce aggregate risk exposures and therefore help to make non-centrally cleared over-the-counter (OTC) markets safer and more resilient to shocks from the failure of market participants, exempting their use from the clearing obligation may introduce the risk of regulatory arbitrage and circumvention.
ESRB Opinion on ESMA’s consultation on PTRRS and the clearing obligation under EMIR Refit
UK Finance
ESMA FIRDS User Guidance 2020 - published by UK Finance - June 2020
UK Finance has published user guidance on the ESMA Financial Instruments Reference Data System (FIRDS). The FIRDS is the reference data architecture developed by ESMA and national competent authorities (NCAs) to provide the publication of, and access to, reference data required under the Markets in Financial Instruments Regulation (600/2014/EU) (MiFIR). It was launched by ESMA in October 2017. The guidance aims to help firms navigate the FIRDS and highlights challenges faced by users that may compromise the completeness, accuracy and timeliness of transaction reporting.
The guidance does not address the UK FIRDS currently under development by the FCA.
UK Finance guidance on ESMA FIRDS
Press release
Agency for the Cooperation of Energy Regulators
REMIT - ACER publishes updated guidance documentation - 1 July 2020
The Agency for the Cooperation of Energy Regulators (ACER) has published updated guidance documents relating to the Regulation on Wholesale Energy Market Integrity and Transparency (1227/2011/EU) (REMIT).
The updated guidance documentation includes: (i) 11 new Q&As providing information on definitions, obligations and prohibitions for market participants and inside information under REMIT; (ii) an updated transaction reporting user manual, which includes Annex III on the reporting of derivatives contracts under REMIT and EMIR; and (iii) updated FAQs on REMIT transaction reporting.
ACER acknowledges that there may be difficulties in implementing the changes introduced by the updated guidance documentation by the end of 2020.
ACER updated Q&As on REMIT
ACER updated TRUM on the reporting of derivatives contracts under REMIT and EMIR
ACER updated FAQs on REMIT transaction reporting
Please see the General section for an item on the FCA’s expectations for firms and benchmark administrators using Appointed Representative arrangements under the Approved Persons Regime and an item on the Association for Financial Markets in Europe’s paper on Senior Managers and Certification Regime responsibilities.
Please see the Brexit section for an item on the House of Commons European Scrutiny Committee requesting clarification from HM Treasury on the UK’s alignment with the Taxonomy Regulation post-Brexit.
Please see the Enforcement section for an item on the FCA’s censure of an AIM-listed company for market abuse and the commencement of criminal proceedings against three individuals.
