Domestic

First edition of the Central Bank's EMIR Questions and Answers

The Central Bank published the first edition of its questions and answers on the European Market Infrastructure Regulation (Regulation (EU) No 648/2012) (EMIR) on 21 January 2020. This Q&A provides answers to queries which may arise in relation to EMIR and the Irish Regulations. The purpose of the Q&A is to provide clarity on EMIR and will be updated regularly.

Central Bank of Ireland publishes 'Dear CEO' letter on Securities Market Conduct Risk

On 21 January 2020, the Central Bank issued a "Dear CEO" letter on Securities Markets Conduct Risk that addresses the findings from its wholesale market conduct supervisory work in 2019. In the letter, the Central Bank sets out areas for improvements and lists its expectations of firms in relation to managing market conduct risk. It also outlines the Central Bank's areas of focus for market conduct supervision in 2020. This letter follows on from the 2019 Dear CEO letter which had announced the formation of a specialised team for supervising wholesale market conduct and set out the Central Bank's expectations in respect of how firms should identify, mitigate and manage market conduct risk.

European

European Commission launches review of MiFID II

The European Commission has launched a public consultation on the review of the MiFID II/MiFIR regulatory framework. The aim of the review is to increase the transparency of European public markets and their attractiveness to investors, and to ensure that they are ready for digital developments.

The consultation takes the form of a questionnaire and invites responses on:

  • whether the MiFID II/ MiFIR framework needs improvement
  • whether there are barriers to its implementation (national legislation or market practices)
  • whether there are barriers to investors accessing financial instruments to meet their investment needs
  • whether the MiFID II/ MiFIR framework has levelled the playing field between different types of execution venues

The consultation will be open until 20 April 2020. Interested parties should note that this consultation is separate to the consultations periodically conducted by ESMA.

ESMA publishes final report on MIFIR alignments following the introduction of EMIR REFIT

After consulting with stakeholders, ESMA has now published its final report to the European Commission providing its recommendations on aligning the trading obligation for derivatives (DTO) under MiFIR with changes made to the scope of the clearing obligation under EMIR REFIT.

EMIR Refit introduced amendments to the scope of counterparties subject to the clearing obligation (an exemption for small financial counterparties and a modified mechanism to determine the obligations of non-financial counterparties above the clearing threshold). As EMIR Refit was not accompanied by direct amendments to MiFIR, this led to a misalignment between the scope of counterparties subject to the clearing obligation under EMIR and the derivatives trading obligation under MiFIR.

In the final report, ESMA sets out three proposed amendments to be made to MiFIR:

  • aligning the scope of non-financial counter-parties
  • aligning the scope of financial counter-parties
  • creating a stand-alone suspension mechanism for the DTO

ESMA’s input will assist the European Commission in preparing a report to be submitted to the European Parliament and Council by 18 December 2020.

ESMA proposes to amend the technical standards in view of the postponing of the entry into force of the CSDR Settlement Discipline

ESMA has proposed a delay to the entry into force of the regulatory technical standards (RTS) on CSDR settlement discipline, until 1 February 2021. ESMA has published a final report on the draft regulatory technical standards in which they set out the explanation for the proposed delay. In particular, the later date is proposed in order to allow for the development of essential elements that are central to the functioning of the settlement discipline regime such as:

  • the development of ISO messages
  • the go-live date of the joint penalty mechanism of CSDs that use a common settlement infrastructure
  • the need for proper market testing, adjustments to legal arrangements between the parties concerned and implementation of IT changes

ESMA consults on MiFIR transparency regime for systematic internalisers (SIs)

ESMA has launched a public consultation paper setting out its proposed amendments to the legal framework on the MiFIR pre-trade transparency regime for SIs active in respect of bonds, structured finance products, emission allowances and derivatives (non-equity instruments). ESMA's proposed amendments include the simplification of the requirements for SI quotes in liquid and illiquid instruments, setting a definition of the exceptional market circumstances to achieve a shared understanding of the exceptional market conditions under which SIs may withdraw quotes in liquid instruments, harmonising the pre-trade transparency data and specifying the arrangements for publishing the quotes. Through publishing this consultation paper, ESMA is seeking input and feedback from stakeholders on the proposed amendments, which ESMA will take into consideration in advance of delivering its final report to the European Commission in July of this year. The consultation will remain open until 18 March 2020.

ESMA consults on MIFIR transparency regime for equity instruments

ESMA has launched a public consultation paper reviewing the transparency regime for equity, ETFs and other related instruments under MiFIR. ESMA has carried out a comprehensive analysis of the effects of the current MiFIR transparency regime since January 2018 and has set out its proposed amendments to the MiFIR transparency regime in light of this review.

ESMA proposes:

  • to either reduce the number of waivers available to market participants or make the use of waivers subject to stricter requirements to address the high volume of dark trading
  • to simplify and widen the scope of the double volume cap regime
  • an increase of minimum quoting obligations subject to pre-trade transparency and a revised methodology for determining quoting sizes and/or an extension of the SI obligations to illiquid instrument
  • clarification of the scope of the trading obligation specifically in relation to third-country shares

Through publishing this consultation paper, ESMA is seeking input and feedback from stakeholders on the proposed amendments which ESMA will take into consideration in advance of delivering its final report to the European Commission in July of this year. The consultation will remain open until 17 March 2020.

Amendments to ESMA Guidelines on enforcement of financial information

ESMA has amended the guidelines on enforcement of financial information (the Guidelines) with a view to further harmonising the enforcement of financial information by national regulators, strengthening the supervisory convergence across the EEA and ultimately improving investor protection. The amended Guidelines will require national competent authorities to harmonise the methods they employ in selecting issuers for examination, the time periods within which all issuers should be examined, and the methods of carrying out the issuer's examinations. The amendments to the Guidelines will become effective on 1 January 2022.

ESMA launches a common supervisory action with NCAS on MIFID II suitability rules

During the course of 2020, ESMA, together with national competent authorities (NCAs), will launch a common supervisory action (CSA) on the application of the MiFID II suitability rules. The CSA will identify the progress made by intermediaries in the application of the MiFID II requirements on the assessment of suitability, and will assist in analysing the extent to which the cost of an investment product is considered by investment firms when being recommended to a client. The aim of the CSA is to increase investor protection by ensuring that the rules in this area are applied in a consistent manner amongst NCAs. The CSA forms part of ESMA's overarching goal to achieve a harmonised and more consistent supervisory culture across the EU.

ESMA sets out its strategy on sustainable finance

ESMA has published its Strategy on Sustainable Finance which sets out ESMA's key priorities in sustainable finance. The strategy notes ESMA's commitment to sustainable finance and its aim to incorporate environmental, social, and governance (ESG) factors into its work going forward.

Among ESMA's key priorities on sustainable finance are the following:

  • transparency: completing the regulatory framework on transparency obligations (via the Disclosures Regulation)
  • risk analysis: analysing financial risks from climate change and reporting on trends, risks and vulnerabilities of sustainable finance (including indicators related to green bonds, ESG investing, and emission allowance trading)
  • harmonisation: pursuing convergence of national supervisory practices on ESG factors
  • participating in the EU Platform on Sustainable Finance
  • supervision: ensuring ESG guidelines are adhered to across the entities supervised by ESMA

ESMA provides update on progress on compliance with the MiFIR pre-trade transparency requirements in commodity derivatives

ESMA has published an update on the implementation of the supervisory briefing on pre-trade transparency requirements in commodity derivatives that was published by ESMA in June of 2019. The objective of the supervisory briefing was to provide guidance to the national competent authorities (NCAs) in order to achieve a common supervisory approach and a common time-table for the enforcement of the MiFIR pre-trade transparency regime. ESMA's update on the supervisory briefing outlines the work completed by NCAs under each stage of the three-stage action plan.

ESMA responds to European Commission consultation on the Benchmark Regulation review

The European Commission has carried out a consultation on the Benchmark Regulation (BMR) in advance of preparing a report on the effectiveness of the BMR to the European Parliament and Council. ESMA has published its response to the European Commission’s consultation in which it puts forward proposals to achieve increased clarification on aspects of the processes involved in the cessation of critical benchmarks, increased transparency surrounding benchmarks, and further consistency between EU and third country benchmarks. The European Commission will take ESMA's responses into consideration before submitting their final report to the European Parliament and Council.

ESMA updates its Q&As on several topics:

MiFID2/MiFIR: ESMA updates Q&A on investor protection and intermediaries topics

ESMA has updated its Questions and Answers (Q&As) on the MiFID II AND MiFIR investor protection topics to provide new answers to questions on ‘MiFID practices for firms selling financial instruments subject to the BRRD resolution regime’.

Prospectus Regulation: ESMA updates Q&As document

ESMA has updated its Q&As on the Prospectus Regulation. The Q&As have been updated to answer two new questions in relation to the inclusion of pro-forma summaries in base prospectuses, and the application of prospectus disclosure annexes in instances where securities do not fall neatly within a specific disclosure regime. ESMA is currently developing Q&As which address issues in relation to the Prospectus Regulation together with updating the Q&As previously issued in respect of the Prospectus Directive and which remain relevant to the Prospectus Regulation. The Prospective Directive Q&As will remain in valid until 21 July 2020

CSDR: ESMA publishes updated Q&As

ESMA has updated its Q&As on the Central Securities Depository Regulation (CSDR). The Q&As have been updated to answer new questions in relation the settlement discipline, specifically on cash penalties, settlement instructions sent by CCPs and Buy-ins.

ESMA publishes updated Q&As on the Credit Rating Agencies Regulation

ESMA has updated its Q&As on the Credit Rating Agencies Regulation (CRAR). The Q&As clarify the process surrounding the periodic review of credit ratings conducted in accordance with Article 8(5) of CRAR including setting out minimum standards for these periodic reviews.