European Commission
Taxonomy Regulation - European Commission publishes roadmap on a Delegated Regulation on taxonomy-related disclosures by undertakings reporting non-financial information - 28 July 2020
The European Commission has published for consultation a roadmap on a Delegated Regulation supplementing the Taxonomy Regulation (EU) 2020/852 on taxonomy-related disclosures by undertakings reporting non-financial information.
The Taxonomy Regulation requires undertakings subject to an obligation to publish non-financial information under the Non-Financial Reporting Directive (2014/95/EU) (NFRD) to include in non-financial statements information on how and to what extent their activities are associated with environmentally sustainable economic activities. Article 8(4) of the Taxonomy Regulation mandates the Commission to adopt, by 1 June 2021, a delegated act specifying the content and presentation of the information that needs to be disclosed, including the methodology to be used to comply with them.
Article 8(2) of the Taxonomy Regulation specifies that non-financial undertakings under the NFRD are obliged to disclose: (i) the proportion of their turnover derived from products or services associated with environmentally sustainable economic activities; and (ii) the proportion of their total investments and expenditure related to assets or processes associated with environmentally sustainable economic activities. The Commission intends to consider whether these indicators should be further specified in the Delegated Regulation and whether different indicators for financial undertakings under the NFRD (such as large banks and insurance companies) should also be developed. If so, the Commission aims to set out the appropriate indicators in the delegated regulation together with a methodology intended to help undertakings to disclose information according to those indicators.
The consultation period closes on 8 September 2020. Once finalised, the Commission intends to adopt the Delegated Regulation in Q2 2021.
European Commission consultation on a roadmap on a Delegated Regulation on taxonomy-related disclosures by undertakings reporting non-financial information under the Taxonomy Regulation
Official Journal of the European Union
COVID-19 - ESMA Decision renewing its temporary requirement lowering the notification threshold for net short positions published in the Official Journal - 30 July 2020
ESMA Decision (EU) 2020/1123 of 10 June 2020, which renews its temporary requirement, pursuant to Article 28(1) of the Short Selling Regulation (236/2012/EU), for natural or legal persons holding net short positions in shares traded on an EU regulated market to notify the relevant national competent authority (NCA) if the position reaches or exceeds 0.1% of the issued share capital, has been published in the Official Journal of the European Union. ESMA imposed the amended notification thresholds for net short positions in March 2020 in response to the economic impact of COVID-19.
The Decision entered into force on 17 June 2020 and applies for a period of three months, until 17 September 2020.
Official Journal: ESMA Decision (EU) 2020/1123 renewing its temporary requirement lowering the notification threshold for net short positions under the Short Selling Regulation
European Securities and Markets Authority
CSDR - ESMA prepares for further postponing the entry into force of RTS on settlement discipline - 28 July 2020
The European Securities and Markets Authority (ESMA) has announced that it is currently developing draft regulatory technical standards (RTS) to further postpone the entry into force of the RTS on settlement discipline under the Central Securities Depositories Regulation (909/2014/EU) (CSDR) until 1 February 2022. In May 2020, the European Commission adopted a Delegated Regulation amending Delegated Regulation (EU) 2018/1229 and postponing the entry into force of the RTS on settlement discipline under the CSDR until 1 February 2021 in light of the impact of COVID-19.
The RTS on settlement discipline under the CSDR cover measures to prevent and address settlement failures, including rules for the trade allocation and confirmation process, cash penalties on failed transactions, mandatory buy-ins and monitoring and reporting settlement failures.
ESMA states that the Commission has asked it to further postpone the entry into force of the RTS following several requests from stakeholders arguing that they will be unable to comply with the requirements of the RTS by 1 February 2021 as a result of COVID-19.
ESMA aims to publish a final report on further postponing the date of entry into force of the RTS by September 2020. Following the endorsement of the RTS by the Commission, the Commission Delegated Regulation will then be subject to the non-objection of the European Parliament and of the Council of the European Union.
Press release: ESMA prepares draft RTS further postponing the entry into force of RTS on settlement discipline under the CSDR
MiFID II/MiFIR - ESMA publishes updated transparency information on third-country trading venues - 28 July 2020
ESMA has published an updated version of its list of third-country trading venues in the context of its Opinion on post-trade transparency for third-country trading venues under the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II) and the Markets in Financial Instruments Regulation (600/2014/EU) (MiFIR).
Following the publication of its Opinion in June 2020, ESMA received requests from market participants to assess more venues against the criteria set out in the Opinion. This review is now finalised and ESMA has published:
- guidance on the implementation of the list of trading venues to determine third-country trading venues for the purposes of transparency under MiFIR, which provides additional information about trading venues with positive assessments and partially positive assessments and explains how to populate the venue of execution in post-trade reports; and
- an updated Annex to the Opinion with the list of venues with a positive or partially positive assessment.
Press release: ESMA publishes updated information on transparency for third-country trading venues
ESMA updated list of third-country trading venues
ESMA guidance on determining third-country trading venues for the purposes of transparency under MiFIR
Updated Annex to ESMA’s June 2020 Opinion on post-trade transparency for third-country trading venues under MiFID II and MiFIR
Financial Conduct Authority
Wholesale financial markets - FCA publishes ‘Dear CEO’ letter to brokerage firms - 24 July 2020
The FCA has published a ‘Dear CEO’ letter from Marc Teasdale (Director of Wholesale Supervision at the FCA) to the CEOs of FCA-authorised firms acting as brokers in wholesale financial markets who currently, or who may in the future, offer services involving holding clients’ cash or securities as collateral. This includes firms providing clearing broker and prime broker services. Among other things, the letter warns such firms against the inappropriate use of title transfer collateral arrangements (TTCAs) and of their obligations under the FCA’s Client Assets sourcebook (CASS).
The FCA notes that it has recently identified examples of firms failing to ensure compliance with their obligations under the CASS rules, including the inappropriate use of TTCAs. In addition, the FCA has seen examples of these same types of firms incorrectly classifying financial transactions as falling within the prudential matched principal exemption, and thus holding lower financial resources than may be required and also acting outside the limitations of their regulatory permissions.
The FCA asks firms to review their use of TTCAs and confirm to the FCA that the senior manager with responsibility for client assets, or alternatively the senior manager responsible for compliance, has considered the issues raised in the letter by 4 August 2020.
FCA ‘Dear CEO’ letter to wholesale financial brokerage firms on the use of TTCAs and their obligations under the FCA’s Client Assets sourcebook (CASS)
International Swaps and Derivatives Association
IBOR fallback rates - ISDA publishes statement on adoption of its Protocol - 29 July 2020
The International Swaps and Derivatives Association (ISDA) has published a statement encouraging market participants with non-cleared derivatives exposure to an interbank offered rate (IBOR) to adhere to its forthcoming IBOR Fallback Protocol. The protocol aims to facilitate the inclusion of new IBOR fallback provisions in existing contracts and transactions between counterparties that both adhere to the Protocol.
The new fallbacks are based on adjusted versions of the risk-free rates previously identified as alternatives to various IBORs in the relevant jurisdictions. ISDA states that these fallback rates will be critical to ensure that derivatives contracts continue to reference clear, transparent and consistent rates if the IBOR they currently reference is discontinued or becomes non-representative.
ISDA statement encouraging market participants to use its IBOR Fallback Protocol
