1.
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
ESMA consulting on clearing obligation under EMIR
ESMA has published a fourth consultation paper on the clearing obligation under EMIR. The
consultation paper is seeking views on establishing a clearing obligation on additional classes of
OTC interest rate derivatives not included in the first RTS on the clearing obligation for interest
rate swaps. EMIR proposes to include the following classes: (i) fixed-to float IRS denominated in
CZK, DKK, HUF, NOK, SEK and PLN; and (ii) forward rate agreements denominated in NOK,
SEK and PLN. Comments are invited by 15 July 2015.
ESMA updates AIFMD Q&A
ESMA has updated its Q&As on the application of the AIFMD. The Q&As include new
questions and answers on reporting and calculation of leverage. The latest questions are
highlighted in yellow in the paper. The aim of the Q&As is to promote common supervisory
approaches and practices in the application of the AIFMD and its implementing measures. The
answers are also intended to help AIFMs by providing clarity on the content of the AIFMD rules.
The Q&As were last updated in March 2015.
ESMA and Commission agree on early review of draft RTS
ESMA and the European Commission have reached a preliminary agreement on conducting an
early legal review of draft technical standards, with the joint objective of ensuring legally sound
final draft technical standards with a concurrent time-saving. The new early review process will
enable the Commission to flag to ESMA any concerns from a legal perspective relating to draft
technical standards before their final adoption by the ESMA board of supervisors, reducing the

2. risk of any potential lengthy re-approval process that could be triggered by concerns of this kind.
The early review process will apply to draft technical standards under the CSDR (the Regulation
on improving securities settlement and regulating central securities depositories) UCITS V,
MiFID II and MiFIR, the Transparency Directive and the Market Abuse Regulation (MAR).
ESMA requests 3-month extension for MiFID II
As a result of the agreement reached between the European Commission and ESMA discussed
above, ESMA has been granted a 3-month extension on itsdeadline to submit draft RTS on the
Level 2 texts for MiFID II to allow for an early legal review. The Level 2 texts will now be
published in September 2015, rather than July 2015, but ESMA does not expect this to result in a
delay of the envisaged implementation time for MiFID II.
ESMA speech on CMU
Steven Maijoor, ESMA Chair, has given some "first indications" of ESMA's reaction to the
European Commission's green paper on the capital markets union (CMU) in a speech this week.
Points of interest include the following: (i) Mr Maijoor comments on two specific alternative
funding channels: securitisations and crowdfunding. Any further changes to securitisation should
build on, and be consistent with, the regulatory reform already underway for securitisations. On
crowdfunding, appropriate regulation could better ensure investor protection, and offer better
development possibilities for crowdfunding platforms (for example, by allowing the passporting
of their activities to other EU member states); (ii) it will not realistically be possible to establish a
full CMU within five years and a limited number of areas should be prioritised; and (iii) it is
important to progress two specific areas, namely the need for investors' participation in the CMU
and an EU-wide comprehensive supervisory approach.
BoE response to CMU green paper
The Bank of England has responded to the European Commission's green paper on the CMU,
strongly supporting the CMU initiative. The Bank has built on its paper entitled "A European
CMU: implications for growth and stability" which it published in February this year. The Bank’s
response considers a wide range of policy proposals that it believes will support economic growth
and stability and highlights a number of key impediments to achieving CMU and explains how
the Bank proposals could help overcome them. The response sets out the Bank’s policy proposals,
which are grouped under five themes, and the Bank’s over-arching considerations to aid in
overcoming the impediments. The Commission published its green paper on 18 February 2015
and intends to publish an action plan on the CMU later in 2015.
BIS to set up working group to consider FX best practices
The Bank for International Settlements has agreed to set up a working group under the auspices
of the BIS markets committee to take forward initiatives being undertaken by FX committees to
strengthen code of conduct standards and principles in FX markets. The aim is to: (i) facilitate
the establishment of a single global code of conduct standards and principles; (ii) promote greater
adherence to these global standards and principles; and (iii) provide input into the wider effort on
FX market conduct co-ordinated by the Financial Stability Board.

3. BoE updates 2015 UK stress test scenario
The Bank of England has updated its UK variant stress test scenario, referred to as the H1 2015
stress scenario, which was first published by the Bank in October 2014. The H1 2015 stress
scenario should be used by firms as a guide to calibrate their own scenarios for Pillar 2 capital
planning stress tests. It aims to give firms a consistent basis on which to confirm that their
planned capital resources are sufficient to remain solvent and adequately capitalised to continue
to write business throughout the capital-planning horizon (normally three to five years).
CRR: RTS on specialised lending exposures
The European Banking Authority is consulting on draft RTS on assigning risk weights to
specialised lending exposures under the Capital Requirements Regulation. Specialised lending is a
type of exposure towards an entity specifically created to finance or operate physical assets,
where the primary source of income and repayment of the obligation lies directly with the assets
being financed. The proposed RTS define four classes of specialised lending: project finance, real
estate, object finance and commodities finance. The draft RTS specify a list of factors that
institutions shall take into account and propose two options on how these factors should be
combined to determine the risk weight assigned to the specialised lending exposure for each of
these classes. Comments are invited by 11 August 2015.
MLD4 and Wire Transfer Regulation
The European Parliament has published recommendations relating to the proposed Fourth Money
Laundering Directive (MLD4) and the proposed revised Wire Transfer Regulation, which it
adopted on 6 May 2015 during its second reading. The procedure files for MLD4 and the revised
Wire Transfer Regulation have also been updated to state that the Parliament will consider both
MLD4 and the revised WTR at its 18 to 21 May 2015 plenary session.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
15 May 2015