ESMA's preparations for a no-deal Brexit for MiFID, MiFIR, BMR and IT systems.

ESMA published a statement on its approach to the application of some MiFID II/ MiFIR and Benchmark Regulation (BMR) provisions in a no-deal Brexit.

BMR approach in summary

  • In the case of a no-deal Brexit, UK administrators will be removed from the ESMA register but qualify as 3rd country administrators and the transitional period applies
  • In the case of a no-deal Brexit, 3rd country benchmarks recognised or endorsed in the UK will be removed from the register and the transitional period applies
  • transitional regime for critical and third-country benchmarks is expected to be extended by 2 years until the end of 2021

UK benchmark administrators

In case of a no-deal Brexit, UK administrators included in the ESMA register of administrators and third-country benchmarks (ESMA register) before the date of the no-deal Brexit will be deleted from the ESMA register. Those UK administrators were originally included in the ESMA register as EU administrators, but after a no-deal Brexit they would qualify as third-country administrators (for which the BMR foresees different regimes to be included in the ESMA register).

However, during the BMR transitional period (as defined in BMR Article 51 and also see Q&A 9.3 of ESMA BMR Q&As) this change of the ESMA register would not affect on the ability of EU27 supervised entities to use the benchmarks provided by those UK administrators. This is because during the BMR transitional period EU supervised entities can use third-country benchmarks even if they are not included in the ESMA register. This BMR provision would also apply to the benchmarks provided by the UK administrators deleted from the ESMA register because of a no-deal Brexit.

3rd country benchmarks recognised or endorsed in the UK

Similarly, if some 3rd country benchmarks were included in the ESMA register before the date of a no-deal Brexit following a recognition or an endorsement status granted in the UK, those third-country benchmarks will be deleted from the ESMA register on the date of no-deal Brexit. The BMR transitional period also applies to these third-country benchmarks. Therefore, during the BMR transitional period this change of the ESMA register would not have an effect on the ability of EU27 supervised entities to use the third-country benchmarks that were endorsed or recognised in the UK before the date of a no-deal Brexit.

Separately, a European Council Press release on 25 February 2019 on Sustainable Finance includes content on a proposed change to the BMR. The EU Presidency and the Parliament agreed on 25 February 2019 on a harmonised, reliable tool to pursue low-carbon investment strategies by establishing a new category, comprising two types of financial benchmarks. The text will also revise existing provisions of the BMR by providing an extension of the transition regime for critical and third-country benchmarks until the end of 2021. Parliament and Council will be called on to adopt the proposed regulation at first reading, scheduled for 15 April 2019.

MiFIR post-trade transparency for OTC transactions between EU investment firms and UK counterparties

ESMA considers the obligations under Article 20 and 21 of MiFIR in the context that investment firms established in the UK post-Brexit will no longer be EU investment firms, but will fall within the category of counterparties established in a third-country.

MiFIR Trading obligation for shares

ESMA outlined its approach, in the event of a no-deal Brexit, to the application of the trading obligation for shares under MiFIR in the absence of an equivalence decision relating to the UK.

ESMA's data operational plan under no deal Brexit scenario

ESMA published a statement setting out its data operational plan for a no deal Brexit and the impact on ESMA's databases and IT systems of a no deal Brexit. In a no deal Brexit scenario, the submission of UK data to ESMA will cease. As a result, ESMA is currently preparing all of its IT systems and databases so they continue to function for the EU27, without UK data.

ESMA has highlighted the actions that market participants interacting with ESMA's IT systems will need to take.

ESMA to recognise UK CCPs and UK CSD

ESMA had previously announced that it will recognise three UK Central Counterparties (CCPs) in a no-deal Brexit - LCH Limited, ICE Clear Europe Limited and LME Clear Limited to provide their services in the EU. ESMA adopted these recognition decisions in order to limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the EU. The recognition decisions would take effect on the date following Brexit date, under a no-deal Brexit scenario.

ESMA is also to recognise the UK Central Securities Depository in the event of a no-deal Brexit

Reform of European System of Financial Supervision

Council of the EU announced that the Council and the European Parliament reached political agreement on the proposed reform of the powers, governance and funding of the European System of Financial Supervision (ESFS). Amendments will include: EBA, EIOPA and ESMA Regulations, the European Systemic Risk Board (ESRB), MiFIR, Benchmarks Regulation, Prospectus Regulation, 4AMLD, Venture Capital Funds Regulation and the European Long-Term Investments Funds Regulation.

The reforms include provisions reinforcing the role of the EBA as regards risks posed to the financial sector by money laundering and terrorist financing activities.

The worrying proposals to give a “stronger role” to the European Supervisory Authorities (ESAs) on supervising delegation arrangements have been dropped. Under the proposal, national regulators would have had to notify ESMA when they received an application from an asset manager for delegation. ESMA would have also had the power to issue recommendations to national regulators over their supervision of delegation arrangements. [link to where this was covered in the bulletins]

The EU Parliament is scheduled to consider the proposals at its 15 - 18 April 2019 session.

The European Commission welcomed the agreement.


ESMA proposed amendments to PRIIPs KID requirements in respect of multi-option products (MOPs) (which are UCITS and certain non-UCITS funds offered as underlying investment options to a PRIIPs). MOPs are currently exempt from preparing a PRIIPs KID and the proposal will allow the derogation for MOPs to be extended to 31 December 2021.

An amendment to the PRIIPs Regulation has already been proposed to extend the exemption for UCITS and certain non-UCITS funds to prepare a PRIIPs KID from 31 December 2019 to 31 December 2021.

See here for our latest summary of the recent developments in the PRIIPs KID, including those related to the exemption for UCITS, and proposed next steps.


Ten Regulations supplementing the Regulations on reporting and transparency of securities financing transactions (SFTR) will enter into force on 11 April 2019. Many are of particular interest to trade repositories. They include regulations concerning the details of securities financing transactions (SFTs) to be reported to trade repositories, access to data and the format and frequency of reports on the details of SFTs to trade repositories.

IOSCO 2019 work programme

The International Organization of Securities Commissions (IOSCO) published its annual work programme. IOSCO's priorities for 2019 relate to:

  • Crypto-assets (regulation of platforms where crypto-asses are traded and regulation of investment funds with exposures to crypto-assets)
  • Artificial intelligence and machine learning (AIML) – (supervision of market intermediaries, including asset managers, that use AIML and examination of ethical challenges that may arise from the use of AIML in securities markets)
  • Market fragmentation – (including that attributable to cross-border regulation)
  • Passive investing and index providers – (review of the impact of passive investing on markets)
  • Retail distribution and digitalisation

In asset management, IOSCO will continue to work on consistent measures of leverage in investment funds, and will undertake further work on exchange traded funds. IOSCO will also consider, among other things, the role of outsourcing and third-party providers in securities markets, how sustainability issues may relate to securities markets, potential inefficiencies in the market due to OTC derivatives reforms and finalise its consistency review on suitability requirements for complex financial products.

Anti-Money Laundering / Combating the Financing of Terror / Corruption / Bribery

EU Council objection to 4AMLD draft list of high risk countries

The EU Council recently voted unanimously to object to the Commission's delegated act identifying high-risk third countries with strategic deficiencies for the purposes of the money laundering directives (4MLD and 5MLD). The proposed act includes countries such as Puerto Rico and the US Virgin Islands on the list of high-risk third countries for the first time.

Consultation on 2009 OECD anti-bribery recommendation

The Organisation for Economic Co-operation and Development (OECD) launched a consultation on its 2009 anti-bribery recommendation (ABR). The consultation closes on 30 April 2019.