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Welcome to Euro Shorts, a short briefing on some of the week’s developments in the financial services industry in Europe.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.  

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Claire Cummings

020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com


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MiFID II: EC Implementing Decision recognising US trading venues

The European Commission has adopted an Implementing Decision under MiFIR listing the US designated contract markets (DCMs) and swap execution facilities (SEFs) that the Commission considers are equivalent to trading venues. The Implementing Decision ensures that EU counterparties can trade the derivatives instruments that are subject to the EU trading obligations on CFTC-authorised DCMs and SEFs in the US; however, this does not affect their ability to continue to trade on any CFTC-authorised DCM or SEF with respect to derivatives that are not subject to the EU trading obligations. The Implementing Decision entered into force on 7 December 2017.


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MiFID II: Scrutiny period for trading obligation extended

The European Parliament has extended the scrutiny period for the Delegated Regulation supplementing MiFIR regarding RTS on the trading obligation for certain derivatives.  The European Commission adopted the Delegated Regulation on 17 November 2017, at which time the Delegated Regulation was passed to the European Parliament and the Council of the EU for scrutiny for a period of one month from 17 November 2017. This period has now been extended to three months. Derivative contracts that are subject to the trading obligation may only be traded on a RM, MTF, OTF or third-country trading venue deemed to be equivalent and the RTS specify the derivatives that should be subject to the trading obligation and the date or dates from which the trading obligation must take effect.


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ESMA asset management priorities in 2018


ESMA has published its asset management sector priorities in 2018, which include the following: (i) in the context of Brexit, co-operation arrangements have to be in place between regulators for certain types of activity, such as the UCITS Directive and the AIFMD, which require co-operation arrangements to be in place in case portfolio or risk management is delegated to an entity in a third country; (ii) in the context of costs and charges of investment funds, it intends to carry out more detailed analysis of the performance of active and passive funds and also look into performance fees; and (iii) in relation to MiFID II, ESMA urges reporting entities not to delay addressing the LEI issue, as it is vital that investment firms and trading venues make the necessary efforts to obtain the LEI in good time.
 


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EC report on supervisory reporting requirements

The European Commission has published a report on the follow-up to its November 2016 call for evidence on the EU regulatory framework for financial services. The call for evidence is part of the Commission’s comprehensive approach to the EU supervisory reporting frameworks, the main objectives of which are to identify specific areas where action is required and to develop measures that can reduce compliance costs for firms while improving the quality of information provided to supervisors. The two main strands of the Commission's approach, which will run in parallel, are: (i) a fitness check of supervisory reporting requirements, which the Commission intends to complete by the end of 2018; and (ii) a financial data standardisation (FDS) project. The Commission intends to report on the results of the fitness check and the main findings of the FDS project by summer 2019.


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EC sets out ongoing initiatives in report on supervisory reporting requirements

Further to the above, section 2 of the report contains details of individual measures introduced in response to the call for feedback, including the following ongoing initiatives that require further analysis: (i) the Commission’s assessment of the proportionality of the AIFMD, focusing on issues such as the alignment of remuneration regimes and the reduction of reporting burdens. The Commission intends to reform to the European Parliament and Council of the EU on the outcome of the review in 2018; (ii) the Commission's work to monitor the application and impact of the outsourcing provisions in the Benchmarks Regulation; and (iii) the Commission's study, conducted as part of the CMU action plan, assessing the distribution of retail products to retail investors across the EU. The Commission expects to publish final findings from the study at the beginning of 2018.


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ELTIF Regulation

The European Commission has adopted a Delegated Regulation supplementing the Regulation on European Long-Term Investment Funds (ELTIF Regulation) with regard to RTS relating to the following: (i) the circumstances in which the use of financial derivative instruments solely serves hedging purposes; (ii) the circumstances in which the life of an ELTIF is considered sufficient in length to cover the life-cycle of each of the individual assets of the ELTIF; (iii) the elements and risks related to each ELTIF underlying asset that an ELTIF manager must take into account in the assessment of the market for potential buyers; (iv) the criteria to be considered for the valuation of the assets to be divested under Article 21(3) of the ELTIF Regulation; and (v) the characteristics and functions of the facilities to be put in place by the manager of an ELTIF marketed to retail investors. ESMA published its final report on the draft RTS in June 2016.


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MLD4

The Joint Committee of the European Supervisory Authorities has published a final report on draft RTS designed to strengthen group-wide management of money laundering and terrorist financing risks under MLD4. Where an entity is part of a group, AML and CTF policies and procedures have to be applied at group level. The Joint Committee recognises that this can be challenging where branches or majority-owned subsidiaries are located outside the EEA, where law may not permit the application of some or all parts of a group's AML and CTF policies and procedures. In these cases, credit and financial institutions must take effective steps to manage the resultant money laundering and terrorist financing risk. The final draft RTS aim to create a level playing field across the EU financial services sector by requiring credit and financial institutions to determine the extent of these measures on a risk-sensitive basis.


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FCA regulatory sandbox update

The FCA has published an update on the next phase of its regulatory sandbox. The FCA announced the opening of the application window for cohort 3 of the regulatory sandbox in June 2017, which includes propositions covering a range of areas including blockchain-based payment services, RegTech propositions, general insurance, AML controls, and KYC verification. The regulatory sandbox provides a space where firms can pilot innovative products and services in a live environment. It was set up as part of the FCA's Project Innovate and first opened to applications on 9 May 2016. The application window for the fourth sandbox phase is now open and firms have until 31 January 2018 to submit their applications.


 

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We have taken great care to ensure the accuracy of this version of Euro Shorts. However, Euro Shorts is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from, action taken or refrained from on the basis of this publication. If you would like to be removed from the mailing list of this publication please click unsubscribe below. Nothing within this communication may be copied, re-printed or similar without prior written consent from Cummings.

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Cummings

Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327

Cummings Law
42 Brook Street
London Greater London W1K 5DB
United Kingdom

www.cummingslaw.com

14 12 2018

 
 

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