News

Securities and markets regulatory news, 14 December 2020

FIG Bulletin

14 December 2020

Recent regulatory developments of interest to financial institutions and markets. Includes updates from the UK FCA, the European Commission and the FSB, among others. Also check our Related Materials links.

Post-Brexit transition period: migrating to FCA FIRDS and FITRS

The UK Financial Conduct Authority (FCA) has published a press release announcing details of the cutover plan for firms migrating to the FCA Financial Instruments Transparency System (FCA FITRS) and FCA Financial Instruments Reference Data System (FCA FIRDS) after the Brexit transition period.

The European Securities and Markets Authority (ESMA) will switch off the FCA's access to reporting systems built under the Markets in Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation (MiFIR) on 31 December 2020. To prepare for this, and provide operational continuity to UK firms, the FCA has built equivalent FCA systems in the UK, called FCA FIRDS and FCA FITRS.

The FCA states that firms can currently use these systems for testing, however, both systems will be unavailable from 16 December 2020 until 2 January 2021 while the FCA rebuilds its data. The FCA will then re-launch the systems with refreshed data.

On its webpage for MiFID reporting after the transition period, the FCA gives more detail of the timeline of each system's availability and outages, and when the systems will be deployed in early January. The webpage also confirms instrument coverage in both FCA systems.

EMIR: European Commission consults on draft Delegated Regulation on procedure for penalties imposed on third-country CCPs

The European Commission is consulting on a draft Delegated Regulation supplementing the European Market Infrastructure Regulation (EMIR) with regard to rules of procedure for penalties imposed on third-country central counterparties (CCPs) or related third parties by ESMA.

Articles 25j and 25k of EMIR (introduced by EMIR 2.2) empowers ESMA to impose fines on third-country CCPs and periodic penalty payments on third-country CCPs and related third parties. Article 25q of EMIR permits ESMA to impose supervisory measures on Tier 2 CCPs. The procedural rules for taking supervisory measures and imposing fines are laid down in Article 25i. Article 25i(7) of EMIR empowers the Commission to adopt delegated acts to specify further the rules of procedures for the power to impose penalties, including provisions on the rights of the defence, temporal provisions, and the collection of fines or periodic penalty payments, and the limitation periods for the imposition and enforcements of penalties.

In proposing to adopt the draft Delegated Regulation under Article 25i (7) of EMIR, the Commission has fully considered all representations received, including technical advice provided by ESMA, the responses to ESMA's public consultation and feedback from the European Securities Committee on the provisional content of this delegated act. It gives responses to feedback received in its consultation paper.

The consultation closes on 4 January 2021. Following this, if neither the Council nor the Parliament object to the draft Delegated Regulation, it will be published in the Official Journal of the EU and will enter into force the day after its publication.

EMIR: European Commission consults on draft Delegated Regulation on procedure for penalties imposed on trade repositories

The European Commission is consulting on a draft Delegated Regulation amending Delegated Regulation EU 667/2014 with regard to the content of the file to be submitted by the investigation officer to ESMA, the right to be heard in relation to interim decisions and the lodging of fines and periodic penalty payments. Delegated Regulation (EU) 667/2014 supplements EMIR with regard to rules of procedure for penalties imposed on trade repositories (TRs) by ESMA, including rules on the right of defence.

The EMIR Refit Regulation introduced into EMIR several changes concerning the rights to access to the file of the persons subject to the investigations (such as the limits to this access excluding ESMA's internal preparatory documents and other confidential information), the amount of the fines and periodic payments that ESMA can impose on TRs, and the right of defence. Therefore, this draft Delegated Regulation amends Delegated Regulation 667/2014 to adapt the existing rules of procedure to take into account the EMIR Refit changes.

In proposing to adopt the draft Delegated Regulation under Article 64(7) of EMIR, the Commission has fully considered all representations received, including the technical advice provided by ESMA, the responses to ESMA's public consultation and feedback from the EGESC.

The consultation closes on 4 January 2021. Following this, if neither the Council nor the Parliament object to the draft Delegated Regulation, it will be published in the OJ and will enter into force the day after its publication.

CSDR review: European Commission consultation

The European Commission has published a consultation paper on a targeted review of the Central Securities Depositories Regulation (CSDR). The Commission notes that a comprehensive review of the CSDR is not yet possible as some requirements did not apply until the entry into force of the relevant regulatory technical standards in March 2017, certain core requirements and procedures provided for under CSDR are yet to be implemented (in particular, the settlement discipline regime), and some EU central securities depositories (CSDs) have only recently been authorised under the CSDR. Nevertheless, the forthcoming Commission report should consider a wide range of specific areas where targeted action may be necessary to ensure the fulfilment of the objectives of CSDR in a more proportionate, efficient and effective manner.

The Commission states that recent developments, in particular the pressure put on markets by COVID-19, has drawn attention to the implementation of rules emerging from CSDR. For example, certain stakeholders argue that mandatory buy-ins would have been disproportionate as they would have heavily impacted market making and liquidity for certain asset classes (in particular the non-cleared bond market).

Also, under Article 81(2c) of the ESMA Regulation, the Commission is required to assess the potential supervision by ESMA of third-country CSDs, including considering recognition based on systemic importance, ongoing compliance, fines and periodic penalty payments.

The Commission's 2021 work programme and its 2020 Capital Markets Union Action Plan have already announced the Commission's intention to bring forward a legislative proposal to simplify the CSDR and contribute to developing a more integrated post-trading EU landscape. The Commission explains that enhanced competition among CSDs would lower the costs incurred by investors and companies in cross-border transactions, and also strengthen cross-border investment. In addition, the legislative proposal will contribute to achieving an EU rulebook in this area.

Comments can be made on the consultation paper until 2 February 2021. Responses will be used by the Commission in preparing its final report.

Questionnaire on continuity of access to FMIs for firms in resolution: FSB Q&A

The Financial Stability Board (FSB) has published a note and Q&A of issues raised during a meeting that was held in September 2020 to discuss its questionnaire on the continuity of access to financial market infrastructures (FMIs) for firms in resolution. The FSB published the questionnaire in August 2020. The questionnaire is a common template for gathering information about the continuity of access to FMIs for firms in resolution and all FMIs are encouraged to complete the questionnaire and publish their responses.

The FSB advises FMIs that have further questions on the questionnaire to engage with their supervision authorities and the bank resolution authority in their jurisdiction to seek guidance.

The FSB hopes that FMIs will be able to finalise their questionnaire responses in late 2020 and will subsequently submit these to their authorities and FMI participants, and publish either the responses themselves or publish a "presumptive path" summary. The FSB intends to evaluate the results of the exercise and the need for potential enhancements to the questionnaire and/or the industry engagement process during 2021.

FX Global Code: GFXC meeting to discuss progress on review

The Global Foreign Exchange Committee (GFXC) has published a press release following a meeting to discuss progress on the review of the FX Global Code of Conduct, among other things.

The GFXC is on track to finalise the review in mid-2021. Ahead of its latest meeting, GFXC members received papers prepared by the working groups for each of the focus areas of the review: buy-side outreach, disclosures, anonymous trading, algorithmic trading, settlement risk and execution principles. One major theme across all areas of the review is the importance of clear and accessible disclosures. There is widespread support for standardised disclosures cover sheets. They have the potential to move the FX market forward in a material way, promoting greater transparency and supporting market participants in making informed choices.

The GFXC discussed the feedback on these papers from the local foreign exchange committees (FXCs). The papers and the proposed changes to the Code will be revised on the back of that feedback and then recirculated to the FXCs for another round of detailed feedback in March 2021. A public request for feedback on some of the review proposals will be launched in April 2021. The final proposals will be submitted for approval by the GFXC at its June 2021 meeting.

The minutes of the meeting will be published in January 2021.