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
EMIR: Bank of England response on CCP interoperability
The Bank of England has published its policy response and summary of the feedback received to
its consultation on its proposed supervisory approach to implementation of ESMA guidelines and
recommendations on interoperability arrangements between EU-based CCPs. The Bank sets out
five standards for assessing interoperability arrangements for UK CCPs, which it describes as the
standards of assessment that the Bank will ordinarily apply, as a minimum, as part of its
supervisory approach in this area. It will, however, always consider the specific circumstances of
each case. As previously reported in Legal Shorts, ESMA published a final report earlier this
month on interoperability arrangements between EU-based CCPs in which it recommended that
the interoperability provisions should be extended to exchange-traded derivatives (ETDs).
EMIR: EBA response on risk mitigation consultation
The European Banking Authority has published responses it has received to its joint consultation
on draft RTS on risk mitigation techniques for OTC derivative contracts not cleared by a CCP.
The draft RTS, which were developed by the Joint Committee of the European Supervisory
Authorities (ESAs), were published for consultation in June 2015. Respondents include: the
Association for Financial Markets in Europe (AFME), the European Banking Federation and
ISDA.
EMIR: ESRB response on clearing obligation consultation
The European Systemic Risk Board has published its response to ESMA’s fourth consultation on
RTS on the clearing obligation under EMIR. In its consultation, which was published in May
2015, ESMA sought views on additional classes of OTC interest rate derivatives that were not

2. included in the interest rate swaps RTS. The additional classes related to fixed-to-float interest
rate swaps and forward rate agreements denominated in various currencies. In its response, the
ESRB, among other things: (i) supports the proposal to apply the clearing obligation to the classes
of OTC interest rate derivatives set out in ESMA's consultation; (ii) emphasises the need to
monitor activity in individual market segments with regard to transaction maturities, once the
clearing obligation has been introduced; and (iii) approves the definitions of the categories of
counterparties the use of the proposed phase-in periods for each of those categories. It
recommends that all RTS on the clearing obligation are adopted as soon as possible.
FCA speech on FEMR
The FCA has published a speech made by Tracey McDermott, FCA Director of Supervision
(Investment, Wholesale and Specialist) regarding the Fair and Effective Markets Review (FEMR),
which published its final report and recommendations in June 2015. Ms McDermott highlighted
the following themes as those that are of particular importance to the FCA: (i) the importance of
individual responsibility and the need to embed accountability with front-line staff for their
actions and to make senior managers properly responsible for their role in controlling their
businesses and managing their staff; (ii) the need for the market itself to take collective
responsibility for maintaining high standards. The fixed income, currency and commodity (FICC)
markets are innovative, ever changing markets and solutions designed by participants are more
likely to be flexible, adaptable, responsive and practical; and (iii) an extension in the regulatory
perimeter, to maintain continued credible deterrence and as a back-stop for when standards slip,
such as closing the current gap in the market abuse regime so that it covers spot FX markets.
FCA speech on use of dealing commission
The FCA has published a recent speech by Marc Teasdale, FCA Head of UK Listing Authority,
which included the following points of interest: (i) Mr Teasdale referred to the use of dealing
commission to fund company research and noted that since clarifying the rules, including a ban on
the use of dealing commission to pay for corporate access, the FCA has seen firms taking steps to
better manage costs and conflicts of interest in this area; (ii) inside information developments
relating to the recent decision in the case of Ian Charles Hannam v FCA (FS/2012/0013), which
demonstrates the importance of getting it right when handling inside information; and (iii) inside
information developments relating to the Market Abuse Regulation (MAR). Mr Teasdale noted
the concerns from issuers about the additional administrative burden the new MAR requirements
may result in, but shares the view that the proper control and dissemination of inside information
is essential to confidence in the integrity of the UK markets.
FCA updates referral criteria for enforcement
The FCA has updated the criteria it uses when deciding whether to refer a firm or individual to its
enforcement division for a formal investigation on a new webpage. The referral criteria set out the
FCA's approach once it chooses to exercise its powers to investigate. The FCA uses the referral
criteria when it considers that the potential outcome of an investigation might be to take
disciplinary action to fine, publicly censure, suspend and/or restrict firms or individuals who have
breached its requirements, or to make a prohibition order. The referral criteria are not intended to
be exhaustive, and the FCA will take all the circumstances of a particular case into account. The
publication on the webpage is intended to make the FCA's decision making process more

3. transparent, so that firms and the public have a clearer understanding of the questions it asks
before it starts a formal investigation.
Capital Markets Union
The European Parliament has adopted a non-binding resolution on building a capital markets
union (CMU), first introduced by the European Commission in February 2015. The resolution
states that Parliament believes that the building blocks for a fully functional CMU should be in
place no later than 2018. The Parliament calls on the European Commission to speed up its work
on the action plan and put forward legislative and non-legislative proposals as soon as possible to
achieve the objective of a fully integrated single EU capital market by the end of 2018. The
Parliament also welcomes the adoption of the ELTIF Regulation, which it considers could
replicate the progress made with UCITS, by encouraging greater allocation of capital to long-
term projects in need of funding, and the Commission's review of the Prospectus Directive.
Introduction of a specialist Financial List
The Lord Chief Justice, Lord Thomas of Cwmgiedd, announced that a specialist Financial List
will be introduced, following a consultation launched in May 2015. The purpose of the Financial
List will be to provide parties to particularly complex or high value financial disputes (£50
million and over), or those that involve issues of general importance to financial markets (that is,
to domestic and international equity, derivatives, FX and commodities markets), with added
procedural flexibility and access to experienced business judges. Lord Thomas has confirmed that
each case will be dealt with by a docketed judge, selected from a pool of financial list judges. The
judge would manage the case from beginning to end.
Reporting regime under REMIT
The Global Financial Markets Association (GFMA) and ISDA have published a joint letter to the
Agency for the Cooperation of Energy Regulators (ACER) expressing their concerns relating to
the reporting regime under REMIT (the Regulation on wholesale energy market integrity and
transparency). The questions raised in the letter relate specifically to reporting arrangements and
the scope of the reporting regime under REMIT. In June 2015, the members of the Joint Energy
Associations Group and the London Energy Brokers' Association published two REMIT reporting
agreements with the aim of facilitating compliance with the REMIT transaction reporting
requirements and obligations.
MiFID II, MAR and data protection
The Article 29 Data Protection Working Party has expressed its concerns to the European
Commission regarding data protection and privacy issues under possible delegated acts under
MiFID II and MAR. The Working Party recognises that MiFID II and MAR are aimed at
protecting consumers, but notes that it is important that data protection rules are observed. The
Working Party draws the Commission's attention to the key data protection and privacy issues it
identifies as the main concerns regarding the implementing measures proposed by ESMA, namely
the data protection rules and principles guaranteed by the Data Protection Directive (95/46/EC)
(DPD), and their possible insufficient implementation in the context of MiFID II and MAR.

4. GUEST SHORTS
This week, Steffan Adfeldt, Director of Financial Services Tax at BDO in London, has provided
us with a summary of relevant tax highlights for financial services firms from last week’s Budget
2015, as follows:
Investment Managers: Capital gains tax treatment of carried interest: Measures are to be
brought in which will tax the entire proceeds received as carried interest as capital gain. For
carried interest received after 8 July 2015, carried interest holders will cease to be entitled to the
“base cost shift” unless the interest relates to a disposal of an asset of a partnership(s) before that
date.
Corporation Tax: The Chancellor announced a reduction in the main rate of corporation tax. The
current rate of 20% will be reduced to 19% from 1 April 2017 and to 18% from 1 April 2020.
Further, following a long period of consultation, revisions will be made to the loan relationship
and derivative contract rules. These changes were deferred from Finance Act 2015 and are
intended to simplify the legislation whilst also making it more robust against tax avoidance. They
will affect companies subject to corporation tax. Some of the changes include: a new corporate
rescue exemption, exempting taxable amounts arising from arrangements made to restructure the
debts of companies in financial distress; a new regime-wide anti-avoidance rules to counter tax
avoidance schemes designed to manipulate the loan relationship and derivative contract rules such
as securing tax deductions for expenses without recognising corresponding amounts of taxable
income; amendments to the general legislative framework such that generally only amounts
recognised in the income statement and computed in line with valid accounting principles being
taxable/relievable; and removal of the ‘fairly represent’ override to taxing amounts recognised for
accounting purposes.
P2P: The Budget contains a number of measures that demonstrate that the Government wants to
improve competition in the banking sector in particular by encouraging lending through the
alternative finance sector. The Government intends to publish draft legislation to introduce a new
Innovative Finance ISA for the purpose of including peer-to-peer loans within ISAs from 6 April
2016. The Government has also published a further consultation on whether to extend the list of
ISA qualifying investments to debt securities and shares offered through crowdfunding platforms.
The Government will also press ahead with providing a new relief allowing individuals lending
P2P platforms to offset any losses from loans that go bad against other P2P interest received.
Draft legislation will be published later in 2015 and the measure will be included in the Finance
Bill 2016 which will take effect from 6 April 2015 (i.e. earlier this year). Finally, the Government
has also announced that it intends to consult over the summer on the introduction of an interest
withholding tax regime for P2P platforms (this was originally announced in last year’s Autumn
Statement) – although in some circumstances UK P2P platforms may already be under an
obligation to withhold UK tax from interest payments.
If you would like to discuss the above or receive further information regarding this or any other
financial services tax issues, please contact Steffan Adfeldt at Steffan.Adfeldt@bdo.co.uk.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com