Securities & derivatives market reform

The securities and derivatives markets have been going through substantial changes and there is a lot more to come. Regulations such as Dodd Frank, European Market Infrastructure Reporting (EMIR) and Markets in Financial Instruments Directive (MiFID II) are already having a major impact and many firms are in the midst of big transformation programmes. Firms that are not dealing with these regulatory changes now or are not properly focussed on them leave themselves exposed to regulatory actions and could be left behind in the market.

Select regulation:

ESMA consults on changes to EMIR transaction reporting rules

Following the start of the European Market and Infrastructure Regulation (EMIR) transaction reporting in February, trade repositories are receiving unprecedented volumes of transaction reports.

Recovery planning for Financial Market Infrastructures (FMIs)

IOSCO provided guidance on the Recovery of Financial Market Infrastructures (FMIs) on 20 October 2014.

FSB discourages excess leverage

The FSB proposed a regulatory framework for haircuts on non-centrally cleared Securities Financing Transactions (SFT's) on 14 October 2014.

ESMA considers a complex problem

The European Securities and Markets Authority (ESMA) communicated its views on complex investment products in two publications on 7 February 2014; Risks of investing in complex products for consumers, and Opinion – MiFID practices for firms selling complex products for firms.

Reporting delays likely for exchange traded contracts

The European Securities and Markets Authority (ESMA) sent a Letter on 6 August 2013 to the European Commission (EC) seeking to postpone EMIR reporting for derivatives executed on regulated markets, also known as exchange traded derivatives (ETD).

EMIR reaches beyond the EU

The impact of EMIR for those trading derivatives outside of the EU.

EU and US agree principles for regulating cross border derivatives

On 11 July the European Union (EU) and the Commodity Futures Trading Commission (CFTC) announced that they had agreed principles for cross-border application of their respective derivatives rules.

Understanding the “retention of risk” rule

The EBA wants to ensure that firms which structure asset backed securities share in some of the risks.

EMIR cross border proposals due in September

On 13 May 2013 European Securities Markets Authority (ESMA) published a letter from the EC (dated 22 April 2013) requiring ESMA to deliver proposals on the cross border application of EMIR by 25 September 2013.

Short Selling Regulation exemption guidelines apply from 2 June 2013

European Securities and Markets Authority published its guidelines setting out more detail on the notification requirements for market makers and primary dealers who are exempt from certain requirements under the Short Selling Regulation.

Commodities Futures Trading Commission approve final final rules for swap exemption and issue no action relief for record keeping and data reporting

On 1 April 2013, the Commodities Futures Trading Commission (CFTC) issued a final rule which exempts swaps between certain affiliated entities within a corporate group from the clearing requirement, time-limited no-action relief recording-keeping for swap dealers (SDs) and major swap participants (MSPs). On 9 April 2013, the CFTC published no-action relief to delay swap data reporting requirements for swap counterparties that are not swap dealers (SDs) or major swap participants (MSPs) until 31 October 2013.

New guidance for recognised investment exchanges and multilateral trading facilities operators

The Financial Conduct Authority (FCA) published guidance for recognised investment exchanges (RIEs) and firms operating multilateral trading facilities (MTFs) on 23 April 201 setting out how RIEs and MTF operators should monitor their members’ systems and controls.

Greek short selling ban extended

European Securities and Markets Authority (ESMA) published an opinion on 30 April 2013 on the emergency measure by the Greek Hellenic Capital Market Commission (HCMC) on short selling and certain aspects of CDS. According to HCMC, the difficulties in the Greek banking sector continue, required its temporary action to be extended for a further three months.

International Swaps and Derivatives Association launches market agreed coupon (MAC) for interest rate swaps

International Swaps and Derivatives Association (ISDA) introduced a form of confirmation for a market agreed coupon (MAC) contract for interest rate swaps (IRS) on 24 April 2013. The confirmation features IRS standardised terms, such as start and end dates, payment dates, fixed coupons, currencies and maturities.

IOSCO considers retail structured products

International Organisations of Securities Commissions published a consultation report on the Regulation of Retail Structured Products on 18 April 2013 in response to concerns from members about the regulatory challenges these products pose.

Directing parent undertakings

The Bank of England and Prudential Regulatory Authority published policy statements on how they intend to use their new powers to give directions over UK firms’ qualifying parent undertakings of PRA- and dual-regulated firms and recognised clearing houses.

Deadline missed for reforming derivatives markets

The Financial Stability Board (FSB) published Over-The-Counter (OTC) Derivatives Markets Reforms – fifth progress report on implementation on 15 April 2013. Less than half of the 24 G20 jurisdictions have developed national legal frameworks and legislation required to implement the reforms. The jurisdictions that have developed rules (US, EU and Japan) still haven’t fully implemented them yet.

Full extraterritorial harmonisation still elusive

The OTC Derivatives Regulators Group (the OTC Regulators), which aims to coordinate and harmonise Over-The-Counter (OTC) reform rules between jurisdictions, published its April 2013 Report to G20 Finance Ministers and Central Bank Governors on 19 April 2013. They agreed to a common approach for treating gaps between requirements for trading and clearing obligations and a consultation process on clearing determinations, adopting a ‘stricter rule applies’ approach.

Financial Conduct Authority focused on transaction reporting issues

The Financial Conduct Authority published a new EMIR webpage in April 2013, setting out the FCA’s supervisory priorities for 2013

Who can access trade data?

The Committee on Payment and Settlement Systems and International Organisations of Securities Commissions published a joint consultative report entitled Authorities’ access to trade repository data on 11 April 2013. The report provides guidance to Trade Repositories and authorities on the principles that should apply when authorities wish to access Trade Repository data.

International Swaps and Derivatives Association proposes Central Counterparties default fund risk model

International Swaps and Derivatives Association published Risk sensitive capital treatment for clearing member exposure to CCP default funds on 1 April 2013, outlining its proposed approach to modelling default fund risks.

New clearing house rules

Bank of England publishishes new instruments for Recognised Clearing Houses (RCHs) and Settlement System Operators on 27 March 2013.

British Banking Association helps firms understand European Market Infrastructure Regulation

On 15 March 2013 the British Banking Association published an European Market Infrastructure Regulation classification approach to help firms.

UK amends rules for European Market Infrastructure Regulation implementation

HM Treasury laid The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 before Parliament on 7 March 2013. The rules amend FSMA, company law and other legislation to implement European Market Infrastructure Regulation from 1 April 2013.

New guidance on European Market Infrastructure Regulation (EMIR) derivative instruments

The FSA updated its European Market Infrastructure Regulation (EMIR) website in March to provide guidance on the scope of financial instruments subject to EMIR in the UK.

Dodd Frank Round-Up

Includes relief for multilateral compression exercises, relief for swap partial novation and partial termination and US begins mandatory clearing.

Prices affected by fragmentation

International Organization of Securities Commissions (IOSCO) published 'Regulatory Issues Raised by Changes in Market Structure' on 21 March 2013. It considered the effect of fragmentation on equities and Exchange Traded Funds in certain IOSCO countries and is seeking comment on four regulatory recommendations.

EMIR FAQs keep market guessing

ESMA published EMIR FAQs on 20 March 2013, setting out the approaches it has agreed with Member State regulators on certain requirements for counterparties, CCPs and TRs.