This weekly briefing from Cummings Law discusses recent developments in UK and EU financial services regulation, including: 1) ESMA publishing responses on guidelines defining commodity derivatives under MiFID. 2) The FCA publishing a new form for notifying intragroup control changes under FSMA. 3) The FCA publishing information on relying on ICE Futures Europe's transaction reporting feed. 4) The FCA consulting on regulating additional UK benchmarks in line with FEMR recommendations.

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Welcome to Legal Shorts, a short briefing on some of the week’s developments in the
financial services industry.
Listen to this week's Legal Shorts on CLTV by going to http://vimeo.com/cummingslaw
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
Definition of derivatives under MiFID
ESMA has published a list of responses it has received to its consultation paper
on draft guidelines on the definition of commodity derivative contracts under
MiFID (ESMA/2014/1189). The guidelines have been proposed to ensure the
consistent classification of certain financial instruments as derivatives, allowing
a consistent approach towards the implementation of EMIR until the
implementation of MiFID II. Respondents include the City of London Law
Society (CLLS), the European Association of CCP Clearing Houses (EACH), the
Federation of European Securities Exchanges (FESE), the Global Financial
Markets Association (GFMA), ISDA and the Futures Industry Association (FIA)
Europe.
New FCA change of control form
The FCA has published a new form for notifying changes in control for
intragroup transactions under section 178 of FSMA. The form can only be used
for intragroup transactions (such as the insertion of new holding companies)

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when there is no change to the ultimate controller of the authorised firm. The
form should be submitted to the FCA, the PRA or both, depending on how a firm
or firms are regulated. The form states that the PRA and the FCA reserve the
right to request the use of a full length notice for internal reorganisations where it
is deemed that this form is not appropriate.
FCA webpage on ICE derivatives reporting
The FCA has published a webpage on transaction reporting and relying on the
ICE Futures Europe transaction feed for derivatives traded on ICE Futures
Europe. The FCA receives a direct electronic transaction report feed from ICE
Futures Europe for the market-side of transactions in reportable debt and equity
derivatives executed on the exchange. Firms directly executing on ICE Futures
Europe have the option to rely on this feed or to report the transactions
independently through their Approved Reporting Mechanism (ARM). The
webpage requests that firms inform the FCA's Transaction Monitoring Unit
(TMU) about whether a firm wishes to rely on the transaction feed for
transaction reporting of derivatives traded on ICE Futures Europe. The webpage
includes a form to submit details.
FCA consults on additional benchmarks
The FCA is consulting on bringing additional financial benchmarks into its
regulatory and supervisory regime. The consultation paper (CP14/32) follows
confirmation by HM Treasury that the government will legislate to regulate
seven additional major UK-based financial benchmarks in the fixed income,
commodity and currency (FICC) markets, in line with a recommendation made
by the Fair and Effective Markets Review (FEMR). The benchmarks are Sterling
Overnight Index Average (SONIA), Repurchase Overnight Index Average
(RONIA), WM/Reuters (WMR) 4pm London Closing Spot Rate, ISDAFIX,
London Gold Fixing (soon to be replaced by the LMBA Gold Price), LMBA
Silver Price and ICE Brent Index. The government's intention is that the FCA
will regulate these benchmarks from 1 April 2015. Comments are invited by 30
January 2015.

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MiFID II update
The FCA has updated its MiFID webpage with further information on its current
focus in relation to MiFID II relating to the following: (i) implementation of
MiFID II, with the biggest practical challenges for the FCA involving issues
such as transaction reporting, commodities position reporting and provision of
information to ESMA for various purposes; (ii) changes to the FCA Handbook to
implement MiFID II, which are not expected until the end of 2015 after relevant
consultations; and (iii) consultation by HM Treasury on the legislative changes
required to implement MiFID II, due in the first quarter of 2015. The FCA has
also been providing input into the work on implementing measures that is being
carried out by ESMA and the webpage has been updated to refer to ESMA's final
technical advice and consultation on MiFID implementation published on 19
November 2014.
ESMA discussion on UCITS share classes
ESMA has published a discussion paper on share classes of UCITS
(ESMA/2014/1577). UCITS IV recognises the possibility for different share
classes to be offered to investors, but it does not prescribe whether, and to what
extent, share classes of a given UCITS can differ from each other. ESMA has
identified diverging national practices relating to the types of share class that are
permitted, as a result of which ESMA is of the view that there is merit in
developing a common understanding of what constitutes a share class of UCITS
and of the ways in which share classes may differ from each other. The
discussion paper sets out ESMA's views on what constitutes a share class,
including how to distinguish share classes from compartments of UCITS, and
possible approaches to the extent of differentiation between share classes that
should be permitted. The closing date for responses to the discussion paper is 27
March 2015.
FMLC letter on OTC derivatives not cleared by CCPs
The Financial Markets Law Committee (FMLC) has published its letter to the
European Commission on draft regulatory technical standards (RTS) on risk
mitigation techniques for OTC derivative contracts not cleared by a central
counterparty (CCP) under EMIR. In the letter, the FMLC draws attention to the
issue of the compatibility of title transfer collateral arrangements (TTCAs) with

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the requirements under Article 1 (segregation of initial margins) of the draft RTS
and requests the Commission to confirm that the initial margin segregation
requirement under Article 1 of the draft RTS is not inherently incompatible with
the use of TTCAs in the transfer of initial margin. The letter responds to the Joint
Committee of the European Supervisory Authorities' consultation paper on the
draft RTS published in April 2014.
EU Regulation on improving the resilience of EU credit institutions
The Presidency of the EU Council has published a progress report on the
proposed Regulation on structural measures improving the resilience of EU
credit institutions. The report sets out the state of play of discussions on the
following key policy issues: the treatment of proprietary trading, the separation
of the other trading activities and the exercise of supervisory discretion, the legal,
economic and operational links between the core credit institution and the
trading entity, the interaction between competent and resolution authorities, the
powers and duties of home and host competent authorities and the proposed
derogation from the structural measures.
EBA sixth report on EU banking sector
The European Banking Authority has published its sixth semi-annual report on
the risks and vulnerabilities of the EU banking system. The report analyses the
main developments and trends affecting the sector in the second half of 2014 and
provides an outlook of the main micro-prudential risks and vulnerabilities. The
report notes, amongst other things, that market sentiment and confidence is
improving, but the signs of recovery remain "modest and fragile" and that the
results of the 2014 EU-wide stress test of 123 banks, released in October 2014,
confirmed the progress of the EU banking sector and the overall resilience of the
major banks to adverse shocks. It also noted that credit risk is still high and that
banks’ income and profitability are still under significant pressure, which is
unlikely to be relieved during 2015.

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EU work programme for first half of 2015
The Latvian Presidency of the Council of the EU has published its work
programme for the period 1 January to 30 June 2015. The programme states that
the Latvian Presidency intends to pursue the following financial services-related
initiatives: (i) capital market union (CMU); (ii) the implementation of "requisite
measures" for ensuring the smooth function of the banking union; (iii) banking
structural reform; (iv) the proposed Regulation on securities financing
transactions (SFTs) (SFT Regulation); (v) the proposed Directive on payment
services in the internal market (PSD2); (vi) benchmark regulation; and (vii) the
new anti-money-laundering framework (presumably the proposed Fourth Money
Laundering Directive (MLD4) and the proposed revised Wire Transfer
Regulation (WTR)). The Presidency will also prioritise reaching agreement on
the General Data Protection Regulation and Directive and finalising negotiations
on the proposed Cyber-Security Directive.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
9 January 2015