European Commission
EMIR and MiFIR - European Commission adopts two Delegated Regulations amending RTS on the CO and DTO - 8 February 2022
The European Commission (the Commission) has adopted two Commission Delegated Regulations amending regulatory technical standards (RTS) on the clearing obligation (CO) and on the derivative trading obligation (DTO) under the European Market Infrastructure Regulation (648/2012/EU) (EMIR) and the Markets in Financial Instruments Regulation (600/2014/EU) (MiFIR), respectively:
- Commission Delegated Regulation (C(2022) 619 final) amending the RTS in Delegated Regulation (EU) 2015/2205 as regards the transition to new benchmarks in certain over-the-counter (OTC) derivative contracts (Regulation 1); and
- Commission Delegated Regulation (C(2022) 620 final) amending the RTS in Delegated Regulation (EU) 2017/2417) as regards the transition to new benchmarks referenced in certain OTC derivative contracts (Regulation 2).
The RTS in Regulation 1 relate to a mandate under Article 5(2) of EMIR and specify the classes of OTC interest rate derivatives denominated in euro, sterling, Japanese yen and US dollar that are subject to the CO under EMIR. The Regulation will amend the RTS to remove from the CO those classes of derivatives that reference the Euro Overnight Index Average (EONIA), the sterling London Interbank Offered Rate (GBP LIBOR) or the Japanese yen LIBOR (JYP LIBOR) as they no longer meet the relevant conditions in EMIR. It will also bring within the CO classes of OTC interest rate derivatives referencing the Euro Short-Term Rate (ESTR), the Secured Overnight Financing Rate (SOFR), the Sterling Overnight Index Average (SONIA) or the Tokyo Overnight Average Rate (TONA) that certain central counterparties (CCPs) have been authorised to clear.
The RTS in Regulation 2 relate to a mandate under Article 32(1) of MiFIR and specify the classes of OTC derivatives that are subject to the DTO under MiFIR. Regulation 2 will amend the RTS to remove from the DTO those classes of derivatives that currently reference GBP LIBOR or USD LIBOR, as they will no longer meet the condition laid down in Article 31(1) of MiFIR.
The Council of the EU and the European Parliament will now scrutinise the Commission Delegated Regulations. If neither body objects, the Regulations will enter into force the day after their publication in the Official Journal of the European Union.
Commission Delegated Regulation (EU) …/… amending the regulatory technical standards laid down in Delegated Regulation (EU) 2015/2205 as regards the transition to new benchmarks in certain OTC derivative contracts (C(2022)619)
Webpage
Commission Delegated Regulation (C(2022)620) amending the RTS in Delegated Regulation (EU) 2017/2417) as regards the transition to new benchmarks referenced in certain OTC derivative contracts (C(2022)620)
Webpage
European Securities and Markets Authority
MiFID II - ESMA launches common supervisory action on costs and charges - 8 February 2022
The European Securities and Markets Authority (ESMA) has launched a common supervisory action (CSA) with national competent authorities (NCAs) on the costs and charges disclosure rules under the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II), which will be conducted during 2022.
The CSA will allow ESMA and the NCAs to assess firms’ application of the MiFID II requirements on costs and charges. It will focus on information provided to retail clients and will involve NCAs reviewing how firms ensure that these disclosures:
- are provided to clients in a timely manner;
- are fair, clear and not misleading;
- are based on accurate data reflecting all explicit and implicit costs and charges; and
- adequately disclose inducements.
ESMA believes that the initiative will help ensure consistent implementation and application of EU rules, and enhance the protection of investors. It also notes that its Q&As, last updated in November 2021, will help NCAs and firms input into the CSA.
Press release
Financial Conduct Authority
LIBOR transition - FCA publishes statement - 9 February 2022
The FCA has published a statement on finalising the transition from the London Interbank Offered Rate (LIBOR), which sets out achievements in sterling markets and what remains to be done. The statement follows the FCA’s overview of the status of the transition from LIBOR, published on 1 January 2022, when the publication of most LIBOR settings ceased.
The FCA notes that the UK Working Group on Sterling Risk-Free Reference Rates (the Working Group) concluded in a meeting held in January 2022 that it had met its objective to “catalyse a broad-based transition to the Sterling Overnight Index Average (SONIA) across sterling derivative, loan and bond markets.” The Working Group will now be moving forward in an amended form with new objectives and further goals, including: (i) supporting the continued active conversion of legacy sterling LIBOR-linked bonds and loans that are dependent on temporary synthetic LIBOR; and (ii) considering any implications of non-sterling LIBOR transition in UK markets. The FCA notes that the Chair of the Working Group, Tushar Morzaria, Group Finance Director at Barclays, is stepping down. He will be replaced by Sarah Boyce of the Association of Corporate Treasurers, who will lead the Working Group in the next phase of its work.
The FCA also highlights remarks from Governor of the Bank of England, Andrew Bailey, on the transition away from LIBOR and the importance of co-operation across a wide range of industry sectors and jurisdictions in achieving the end of most LIBOR settings by the end of 2021 with minimal disruption. He has also called for those firms with remaining LIBOR exposures to continue this effort to ensure that the transition is completed smoothly.
The FCA will seek views in 2022 on retiring 1-month and 6-month synthetic sterling LIBOR at the end of 2022 and on when to retire 3-month synthetic sterling LIBOR.
Press release
See also the General section for an item on the ESAs’ response to the European Commission’s digital finance call for advice and the Beyond Brexit section for an item on the EU’s temporary equivalence decision in relation to UK central counterparties
