Euro shorts 09.05.14 including FCA’s new MiFID II webpages and think tank comments on UK economy

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Euro shorts 09.05.14 including FCA’s new MiFID II webpages and think tank comments on UK economy

  1. 1. 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. Claire Cummings 020 7585 1406 claire.cummings@cummingslaw.com www.cummingslaw.com FCA’s new MiFID II webpages The FCA has published a set of new webpages on MiFIR which are designed to help keep people up to date on developments relating to MiFID II. The webpages address a number of topics, including: (i) what firms will need to do; (ii), a summary of the significant changes proposed to the Markets in Financial Instruments Directive; (iii) the MiFID II legislative process; (iv) MiFID II implementing measures and transparency calculations; and (v) ESMA’s consolidated list of trading venue identification codes. Those interested in receiving MiFID II email updates from the FCA can register with the FCA via its website. FTT It has been reported that finance ministers from 11 eurozone countries plan to form a legal basis for a phased-in tax on financial transactions that would be implemented in 2016. Meanwhile, the German Finance Minister Wolfgang says a proposed tax on financial transactions in 11 eurozone nations should first tackle shares and certain derivatives and in the UK, George Osborne has said that the UK is within its rights to challenge the FTT should it affect non-participating European countries. It is reported that the UK’s legal challenge might be backed by Sweden as its dissatisfaction with the proposal grows. The Swedish Finance Minister Anders Borg is quoted as saying "We did not support the U.K. when they started this legal
  2. 2. case; we are much closer to doing that, because the process has not been satisfactory during these last few months." Think tank comments on UK economy The National Institute of Economic and Social Research (NIESR) said "robust" growth helped the economy to expand by between 1pc and 1.2pc in the three months to April, saying that the UK is close to the pre-recession peak. The NIESR predicts growth continuing and being fuelled by consumption growth. EMIR frontloading requirements ESMA has written to the European Commission informing the Commission of its intention to ease certain frontloading requirements under EMIR. The frontloading requirement is the obligation to clear certain OTC derivative contracts entered into after a CCP has been authorised under EMIR and before the date of application of the clearing obligation. Under the frontloading rules, a contract concluded on a bilateral basis following authorisation of a CCP might become subject to the central clearing obligation before its expiration date. ESMA believes that the frontloading procedure creates uncertainties for derivatives end-users while the exact terms of the clearing obligation have not been defined.. ESMA therefore intends to establish the frontloading requirement in a way that will minimise the uncertainty. Proposals for best practices for T2S markets' migration to T+2 On 6 May 2014, the ECB published proposals by the TARGET2-Securities (T2S) Harmonisation Steering Group (HSG) for best practices for T2S markets migrating to the T+2 settlement cycle on 6 October 2014. The HSG established a task force on T+2, whose primary aim is to ensure co- ordination across T2S regarding the change in settlement cycle and to minimise the impact of moving to T+2 for market participants. The proposals are set out in the following three sections: (i) Section 1 covers the scope of the T+2 settlement cycle; (ii) Section 2 focuses on the migration plans of markets to move to the T+2 rule; and (iii) Section 3 aims to provide some ideas in the context of the move to T+2 for the timely completion of the post-trade and pre-settlement activities, as well as the monitoring of matching timeliness and settlement fails. The ECB has also published a
  3. 3. letter from the chairmen of HSG and T+2 task force to ESMA’s Head of Markets Division. Among other things, the letter states that in addition to the ECB, the HSG has also sent the proposals to ESMA and the European Commission for their consideration. FCA policy statement on competition in the markets for services provided by a regulated investment exchange The FCA has published a policy statement on competition in the markets for services provided by a recognised investment exchange (RIE) (PS14/6). The FCA has previously consulted, and the policy statement provides feedback on responses and sets out the changes to the FCA's Recognised Investment Exchange and Recognised Clearing House sourcebook (REC). One modification amends its proposed change to REC 6.7 (notification rules for overseas recognised bodies) to limit the scope of the obligation to events having a "material" effect on competition to bring this in line with the rule applicable to UK RIEs. The handbook instrument, which is included in an appendix to the policy statement, also provides that the change to REC 3.26G (proposals to make regulatory provision) comes into effect on 2 June 2014, giving UK RIEs some time to review and update their procedures for making notifications. The other changes to REC came into effect on 2 May 2014. Designation of global systemically important reinsurers postponed to November 2014 The Society of Lloyd's has updated its webpage on systemic risk to report that it has recently been announced that the list of major reinsurers designated as systemically important has been further delayed from July 2014 to November 2014. The Lloyd's webpage states that the International Association of Insurance Supervisors has said that, whereas the methodology for the first nine global systemically important insurers focuses on non-traditional or non-insurance activities, for reinsurers the issues relating to substitutability and interconnectedness are more complex than for insurers and require further study and analysis.
  4. 4. Markit IPO The press reports that London-based Markit has filed for an initial public offering in the US. ECB comments on inflation The European Central Bank has delayed any concrete measures to stop the eurozone sliding towards deflation. However, it has both indicated action in June and issued a stark warning about the euro exchange rate with Mario Draghi, the ECB’s president, saying “The strengthening of the euro in the context of low inflation and still low levels of economic activity is a serious concern. The exchange rate will have to be addressed.” Upcoming event On 21 - 22 May 2014 the FCA Transaction Reporting Forum will be held, attendance expected those FCA regulated firms which have with responsibility for transaction reporting. To register please go to http://fca.cvent.com/events/transaction-reporting-update/event-summary- 3909e156e91c4b9cb34e685ff161ec84.aspx Cummings Tel: + 44 20 7585 1406 Mob: + 44 7734 057 327 www.cummingslaw.com 9 May 2014

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