Read on for the highlights from this month's roundup of developments affecting financial markets, banks, wealth managers, brokers and funds.

Investment & Investment Services
  • FCA asset management market study remedies: policy statement, final rules and further consultation 
  • FCA updated forms on asset management authorisation process
  • CMA publishes working papers on investment consultants market investigation; and fiduciary management services
Funds
  • European Commission adopts Delegated Regulation on investment requirements under MMF Regulation
  • Commission proposes to extend the transitional period on own funds requirements for exposures to CCPs
Derivatives
  • ISDA publishes guide to navigating derivatives trading on US and EU recognised trading venues
  • ISDA publishes factsheet on compliance with initial margin requirements
Securities
  • ESMA asks Article 29 Working Party to amend draft guidelines on "public interest derogations" for international data transfers between securities markets authorities under Article 49 GDPR
  • IOSCO publishes final report on regulatory reporting and transparency in secondary corporate bond markets
EU Withdrawal
  • Draft SI on Financial Regulators' Powers and other developments
Investment & Investment Services
FCA asset management market study remedies: policy statement, final rules and further consultation

The FCA has published a policy statement, setting out feedback on CP17/18 and final rules implementing some of the remedies identified in its asset management market study (AMMS). It has also published a consultation paper of further remedies. The main changes to the rules consulted on in CP17/18 relate to: Value for money assessments and reporting; Independent directors; Senior Managers and Certification Regime (SM&CR); Box Profits; Share Classes.

The final rules are set out in the:

The FCA has also published: a consultation paper on further remedies following the AMMS and an occasional paper on drawing attention to charges in the asset management industry. The deadline for the responses to the consultation is 5 July 2018. And a speech by Andrew Bailey, FCA Chief Executive, on asset management from a regulatory perspective.

FCA, 27 April 2018

FCA forms on asset management authorisation process

The FCA has published three new forms to assist firms in the pre-application stages:

A new webpage on prudential categories for asset managers has also been published which is intended to help firms identify the key regulatory requirements that determine their prudential category. In addition the FCA has updated its webpage on submitting an application.

FCA, 20 April 2018

ECON draft report on proposed Investment Firms Regulation and Directive

The European Parliament's Economic and Monetary Affairs Committee (ECON) has published its draft report on the proposal for a Regulation on the prudential supervision of investment firms (IFR). 

ECON has also published its draft report on the proposal for a Directive on the prudential supervision of investment firms (IFD).

The explanatory statement states support for a dedicated, tailor-made, regime for investment firms in the EU, including amendments on: Own funds requirements for class 3 firms; Movements between class 2 firms and class 3 firms; Capital and liquidity requirements and K-factors; Reporting, governance and remuneration; and Third country regime and equivalence.

ECON, 11 April 2018

CMA publishes three working papers in investment consultants market investigation

As part of its investment consultants market investigation, the Competition and Markets Authority (CMA) published working papers on barriers to entry and exit, financial performance and profitability, and the competitive landscape. Consultation ends 10 May 2018.

CMA, 26 April 2018

CMA working paper on supply of fiduciary management services in investment consultants market investigation

The CMA has published a working paper on the supply of fiduciary management services by investment consultants as part of its market investigation into the supply and acquisition of investment consultancy and fiduciary management services in the UK. This working paper sets out the CMA's initial analysis of competition issues that may arise when firms offer both investment consultancy and fiduciary management services.

The CMA has found some evidence of practices and behaviours on the supply and demand side that could be consistent with some customers being steered towards the fiduciary management services of their incumbent investment consultant, without having applied much competitive pressure on the incumbent firm. The CMA seeks views by 12 April 2018 on its analysis and emerging thinking, and also on some possible remedies that it has identified to encourage trustee engagement and to reduce potential conflicts of interest.

CMA, 5 April 2018

Funds
European Commission adopts Delegated Regulation on investment requirements under MMF Regulation 

The European Commission has adopted a Delegated Regulation on simple, transparent and standardised securitisations and asset-backed commercial paper, requirements for assets received as part of reverse repurchase agreements and credit quality assessment methodologies under the Regulation on money market funds (MMF Regulation).

European Commission, 10 April 2018

BEIS consults on reform of limited partnership law

BEIS has published a consultation paper seeking views on proposals to reform the law of limited partnerships, including: anyone presenting an application for an LP to provide evidence of supervision under money laundering regulations; LPs to do business or maintain a service address in the UK; LPs to file annual confirmation statements; and Companies Registrar power to strike off LPs. 

BEIS, 30 April 2018

Derivatives
Commission proposes to extend transitional period on own funds requirements for CCP exposures

The European Commission has published a draft Implementing Regulation on the extension of the transitional periods related to own funds requirements for exposures to central counterparties (CCPs) set out in the Capital Requirements Regulation (Regulation (EU) 575/2013) and the European Markets Infrastructure Regulation (Regulation (EU) 648/2012).

European Commission, 18 April 2018

ISDA guide to navigating derivatives trading on US and EU recognised trading venues

The International Swaps and Derivatives Association (ISDA) has published a practical guide to navigating derivatives trading on US/EU recognised trading venues to help address regulatory complexities and compliance challenges in the absence of wholesale equivalency between the US and EU derivatives regulatory regimes.

ISDA, 26 April 2018

ISDA publishes factsheet on compliance with initial margin requirements

The International Swaps and Derivatives Association (ISDA) has published a guide setting out the steps firms should take when preparing to comply with regulatory initial margin requirements. Each September until 2020, increasing numbers of entities will be required to meet initial margin regulations as the threshold level for compliance reduces. ISDA warns that preparation for meeting the requirements will take significant time, and will involve intensive work to ensure systems, processes and documentation are in place.

ISDA, 16 April 2018

BoE implements SONIA reforms

The Bank of England implemented reforms to the sterling overnight index average benchmark. Previously, the benchmark was based on a market for brokered deposits which has limited transaction volumes. It will now use a different methodology, which captures a broader scope of overnight unsecured deposits by including bilaterally negotiated transactions alongside brokered transactions.

Bank of England, 23 April 2018

Industry associations advocate EMIR amendment to incentivise post-trade risk reduction

ISDA, the European Banking Federation (EBF), the International Capital Market Association (ICMA) and the International Securities Lending Association (ISLA) (the Associations) published a whitepaper 'EMIR REFIT: Incentivising Post-trade Risk Reduction' in which they propose amending the European Market Infrastructure Regulation (EU) 648/2012 (EMIR) to allow transactions that result from post-trade risk reduction services such as portfolio compression and counterparty re-balancing to be exempted from the clearing obligation. Post-trade risk reduction administrative transactions are exempt from the trading obligation under the Markets in Financial Instruments Regulation (EU) 600/2014 (MiFIR) but there is currently no corresponding exemption from the EMIR clearing obligation.

ISDA, 10 April 2018

HMT responds to Parliament scrutiny committee on proposed Regulation amending EMIR supervisory regime

The government has published letters from John Glen, Economic Secretary to the Treasury, to Sir William Cash, House of Commons European Scrutiny Committee Chair and Lord Boswell of Aynho, House of Lords European Union Committee Chair, which respond to questions raised by the committees about the proposed Regulation amending the ESMA Regulation and EMIR with regard to the procedures and authorities involved for the authorisation of central counterparties (CCPs) and the recognition of third-country CCPs.

HM Treasury, 23 April 2018

ESMA asks European Commission to clarify ancillary activity test under MiFID II

The European Securities and Markets Authority (ESMA) published a letter from ESMA to the European Commission relating to exemption from authorisation as an investment firm that non-financial entities are eligible for when their commodity derivative trading activity is ancillary to their main business as set out in the MiFID II Directive.

European Securities and Markets Authority, 10 April 2018

EMMI update on Euribor test phase

The European Money Markets Institute (EMMI) has published an update on the hybrid methodology for Euribor, saying it has entered a phase of testing between 2 May 2018 to 31 July 2018.  EMMI will conduct an in-depth data analysis under a number of scenarios, and assess all methodological parameters, to ensure that the choices made by EMMI represent a robust and representative benchmark. The testing phase will be followed by a second stakeholder consultation in Q3 2018.

EMMI, 2 May 2018

CPMI-IOSCO technical guidance on harmonisation of critical OTC derivatives data elements

A report has been published by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) which provides technical guidance to authorities on harmonised definitions, formats and usage of a set of critical data elements for OTC derivative transactions reported to trade repositories, excluding the unique transaction identifier and the unique product identifier.

CPMI-IOSCO, 9 April 2018

Commission proposes to extend the transitional period on own funds requirements for exposures to CCPs

The European Commission has published a draft Implementing Regulation on the extension of the transitional periods related to own funds requirements for exposures to central counterparties (CCPs) set out in the Capital Requirements Regulation (Regulation (EU) 575/2013) and the European Markets Infrastructure Regulation (Regulation (EU) 648/2012).

European Commission, 18 April 2018

Securities
EBA consults on guidelines for interpreting the STS criteria in securitisation

The EBA is consulting on draft guidelines which aim to provide a harmonised interpretation of the criteria for securitisations to be eligible as simple, transparent and standardised (STS). The EBA says the guidelines will play a crucial role in the new EU securitisation framework, by providing a single point of consistent interpretation of the STS criteria to originators, sponsors, investors and competent authorities throughout the EU. The consultation runs until 20 July 2018.

EBA, 20 April 2018

ESMA publishes Prospectus Regulation Technical Advice

ESMA has published technical advice under the Prospectus Regulation, covering format and content of prospectus, the EU growth prospectus and the scrutiny and approval of prospectus. 

ESMA, 3 April 2018

ESMA asks Article 29 Working Party to amend draft guidelines on derogations under Article 49 of GDPR

ESMA has published its response, requesting some amendments, to the Article 29 Working Party's February 2018 consultation on draft guidelines on Article 49 of the General Data Protection Regulation, the "public interest derogation" applicable to international transfers of personal data necessary for important reasons of public interest..  Globally, only 10 securities markets authorities are currently covered by a GDPR adequacy decision.

ESMA, 22 March 2018

IOSCO final report on regulatory reporting and transparency in secondary corporate bond markets

International Organization of Securities Commissions (IOSCO) published a final report on regulatory reporting and public transparency in the secondary corporate bond markets. The report makes seven recommendations that emphasise the importance of ensuring the availability of information to regulators (through trade reporting), and to the public (through trade transparency requirements).

IOSCO, 5 April 2018

ESMA publishes bond liquidity assessment under MIFID II

ESMA has published its first liquidity assessment for bonds subject to the pre- and post-trade requirements of the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). The assessment is based on a quarterly assessment of quantitative liquidity criteria, such as the daily average trading activity (trades and notional amounts) and number of days traded per quarter. 

ESMA, 2 May 2018

European Scrutiny Committee reports on covered bonds and crowdfunding proposals

The items considered by the European Scrutiny Committee at its meeting on 25 April 2018 included the proposed Covered Bonds Directive and related amendment to the Capital Requirements Regulation, and the proposed European Crowdfunding Service Providers Regulation and related amendment to MiFID II.

European Scrutiny Committee, 25 April 2018

Capital Requirements
Commission proposes to extend the transitional period on own funds requirements for exposures to CCPs

The European Commission published a draft Implementing Regulation on the extension of the transitional periods related to own funds requirements for exposures to central counterparties (CCPs) set out in the CRR and the European Markets Infrastructure Regulation (Regulation (EU) 648/2012) (EMIR).

European Commission, 18 April 2018

EBA consults on guidelines regarding high-risk exposures

The EBA is consulting on its guidelines regarding the types of exposures to be associated with high risk under Article 128(3) of the Capital Requirements Regulation (CRR). The guidelines specify which types of exposures, other than those mentioned in Article 128 (2) CRR, are to be associated with particularly high risk and under which circumstances. The consultation runs until 17 July 2018.

EBA, 17 April 2018

HM Treasury responds to Basel III implementation consultation

HM Treasury published its response to the European Commission’s consultation on the EU implementation of the Basel III international prudential standards. HM Treasury said the UK was committed to the ‘full, timely and consistent’ implementation of the reforms, but stressed the need to apply the rules in a proportionate manner.

HM Treasury, 17 April 2018

FMLC paper highlights risks of proposed new BRRD moratorium powers

The Financial Markets Law Committee (FMLC) published a paper highlighting legal and practical risks which may arise in the context of the European Commission's proposal to amend the moratorium powers under the Bank Recovery and Resolution Directive 2014/59/EU (BRRD). The FMLC recommends that the proposed new moratorium powers should be synchronised with international standards.

FMLC, 17 April 2018

Commission endorses French tightening of large exposure limit under CRR

The Council of the EU published a decision by the European Commission not to propose an implementing act to reject a proposed national measure by France under Article 458(4) of the CRR.

Council of the EU, 13 April 2018

European Commission publishes report on effects of CRR and CRD IV

The European Commission published a report on the effects of the Capital Requirements Regulation (CRR) (Regulation 575/2013) and the Capital Requirements Directive IV (Directive 2013/36/EU).

European Commission, 9 April 2018

EU Withdrawal
Draft SI on Financial Regulators' Powers and other developments

The UK government has published draft Financial Regulators' Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations 2018, 17 April 2018.

The European Parliament published a briefing on third-country equivalence and EU passporting, including the ongoing ESAs review, the Investment Firm Review, and EMIR 2.2. 27 April 2018.

Speeches on equivalence by Valdis Dombrovskis (European Commission VP) and Andrew Bailey, were published, both 24 April 2018.

HMT and the European Commission have asked the ECB and BoE to convene a technical working group on risk management in the period around 30 March 2019 for financial services, 27 April 2018.

The European Parliament's Committee on Economic and Monetary Affairs (ECON) has published a draft report on relationships between the EU and third countries concerning financial services regulation and supervision, 4 April 2018.

The European Parliament's Committee on Economic and Monetary Affairs (ECON) published its draft report on relationships between the EU and third countries concerning financial services regulation and supervision, 9 April 2018.

The International Swaps and Derivatives Association (ISDA) published an updated version of its Brexit FAQs, 10 April 2018.

A position paper has been published by the Alternative Investment Management Association (AIMA) which discusses the impact of Brexit on the alternative investment industry, 9 April 2018.

Commission issues warning on IORPs after Brexit

The European Commission has published a notice to stakeholders on the implications of Brexit for the rules in the field of institutions for occupational retirement provision (IORPs). As of the withdrawal date, IORPs registered or authorised in the UK will no longer benefit from the registration or authorisation under Directive (EU) 2016/23414 to provide services in the EU and will be treated as third-country undertakings, to which Directive (EU) 2016/2341 does not apply.

European Commission, 27 April 2018

General Developments
CPMI and IOSCO report on CCPs' progress in implementing PFMI

A report has been published by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO), monitoring implementation of the Principles for Financial Market Infrastructure (PFMI): follow-up Level 3 assessment of CCPs recovery planning, coverage of financial resources and liquidity stress testing.

CPMI and IOSCO, 3 May 2018

FCA feedback on '5 Conduct Questions' programme

The FCA has published the 2017 industry feedback on its '5 Conduct Questions' programme. The report also contains some conduct risk observations from the FCA's other supervision activity with wholesale banks, covering pricing transparency for complex derivatives and an assessment of technology and cyber risk, including the governance thereof. 

FCA, 1 May 2018

BoE speech on hidden risks in markets

The Bank of England (BoE) has published a speech by Alex Brazier, BoE Executive Director for Financial Stability Strategy and Risk, on hidden risks in markets, focusing on corporate debt, collateral calls and liquidity mismatch.

BoE, 29 April 2018

FSB second consultation on governance arrangements for unique product identifier

The Financial Stability Board (FSB) has published a second consultation paper on governance arrangements for the unique product identifier (UPI).

FSB, 26 April 2018

Key contacts

David Ellis

David Ellis

Partner, Financial Regulation
London

View profile
Brian McDonnell

Brian McDonnell

Partner, Financial Regulation
London

View profile