Financial Regulatory Developments (FReD) - 12 October 2012

EUROPEAN UNION AND INTERNATIONAL

Presidency of the European Union (Presidency)

Presidency tables new MAR compromises: The Presidency has published new compromise texts for the Directive on Criminal Sanctions for Insider Dealing and Market Manipulation (CMAD) and the Market Abuse Regulation (MAR). (Source: Presidency Compromise Text on CMAD 5 October and Presidency Compromise Text on MAR 4 October)

Contact: Rosali Pretorius or Emma Radmore.

Presidency publishes more MiFID 2 compromises: The Presidency has published a further set of compromise texts for the proposals for a Markets in Financial Instruments Directive (MiFID 2) and Regulation (MiFIR). The amendments relate to the market-making obligation for algorithmic traders and the flagging of their trades. (Source: MiFID 2 Compromise Text 9 October and MiFIR Compromise Text 9 October)

Contact: Rosali Pretorius or Emma Radmore.

European Commission (Commission)

Commission consults on NBFI resolution: The Commission has published an informal consultation on a recovery and resolution framework for non-bank financial institutions (NBFI). The paper looks at which NBFIs could present systemic risks if they fail. Its concerns and proposals focus on the risks that failure of key parts of the financial markets infrastructure, specifically Central Counterparties (CCPs) and Central Securities Depositories (CSDs), would present. It analyses the risks of each, commenting that not all institutions face the same risks. The paper asks whether an EU-wide framework to deal with the recovery and resolution of CCPs and CSDs is needed and asks for views on situations where either recovery plans or retrospective resolution might be appropriate. Other questions focus on whether there should be a common framework or one specific to each type of market participant, whether there should be size thresholds above which the rules would apply, the most important objectives of the plans and trigger points. It also considers powers of regulators and cross-border challenges. The consultation then considers the risks presented by failure of insurers and reinsurers and notes that existing EU measures for the insurance market do not cater for recovery and resolution of insurance entities. Again, it asks what powers should be used, and when, to deal with a systemically important insurer. Finally, it considers payment systems, payment institutions and e-money issuers and asks what powers would be appropriate to deal with systemic risk arising from failure in this, or any other NBFI, sector. Comments are due by 28 December. (Source: Commission Consults on NBFI Resolution)

Contact: Rosali Pretorius or Andrew Barber.

CRA equivalence decisions in OJ: The Commission implementing decisions to recognise the equivalence of the US's and Australia's legal and supervisory framework for credit rating agencies (CRAs) have now been published in the Official Journal of the EU (OJ). The draft decision for Canada is also available. (Source: Decision on Equivalence of US's CRAs Supervision, Draft Decision on Equivalence of Canada's CRAs Supervision and Decision on Equivalence of Australia's CRAs Supervision)

Contact: Edward Hickman or Rosali Pretorius.

Commission says FTT to go ahead: The Commission has announced it has received commitments from 11 Member States (not including the UK) to support a common financial transaction tax (FTT) for their jurisdictions. The FTT initiative can now progress via enhanced cooperation of the participating Member States. Algirdas Semeta, the Commissioner responsible for taxation, views the FTT as a means to encourage more responsible trading and to prevent a patchwork of national bank taxes. He will submit the proposal to the Council of the EU in November, and the participating Member States will have to agree to it by unanimity. (Source: Statement by Commissioner Semeta and Press Release Council Meeting 9 October)

Contact: Rosali Pretorius or Jeremy Cape.

Short selling RTS published in OJ: The Commission's regulatory technical standards (RTS) for the regulation on short selling and certain aspects of credit default swaps, adopted on 5 July, have now been published in the OJ. They will apply from 1 November. One deals with the method of calculation of the fall in value of liquid shares and other financial instruments. The other covers definitions, the calculation of net short positions, covered sovereign credit default swaps, notification thresholds, liquidity thresholds for suspending restrictions, significant falls in the value of financial instruments and adverse events. (Source: Commission Delegated Regulation No 918/2012 -OJEU 9 October and Commission Delegated Regulation No 919/2012 -OJEU 9 October)

Contact: Rosali Pretorius or Matthew Sapte.

European Parliament (EP)

ECON adopts CMAD and MAR reports: On 9 October, the Economic and Monetary Affairs Committee (ECON) in EP adopted its CMAD and MAR reports. The rapporteur, Arlene McCarthy, explained that ECON wants to ensure that maximum jail sentences across Member States are at least five years for the more serious offences. They also want sanctions to be made public and fraudsters to be named. All trading venues must adopt procedures for preventing abusive practices, and exchange of information between countries should be mandatory. (Source: Market Abusers Should Face Jail, Say Economic Affairs MEPs)

Contact: Rosali Pretorius or Emma Radmore.

ECON tables MiFID 2 reports for plenary: ECON has published the reports by Markus Ferber on the Commission's proposals for MiFID 2 and MiFIR in preparation for EP's plenary session on 25 and 26 October (see also FReD 28 September). (Source: Ferber Report on MiFID 2 and Ferber Report on MiFIR)

Contact: Rosali Pretorius or Emma Radmore.

EP updates voting dates: EP has announced new voting dates on its legislative observatory (OEIL):

the vote in plenary of the own-initiative procedure "Towards an integrated European market for card, internet and mobile payments" will be on 19 November 2012; and the Committee vote on the regulation on improving securities settlement in the EU and central securities depositories (CSDs) will be on 21 January 2013. (Source: OEIL File for Card, E- and M-Payments INI and OEIL File for CSDs Regulation)

Contact: Emma Radmore or Juan Jose Manchado.

European Economic and Social Committee (EESC)

EESC publishes CSD opinion: EESC has published its opinion on the proposed Regulation on improving securities settlement and on central securities depositories (CSDs). It supports the prohibition on CSDs holding a banking licence, only allowing them to set up a standalone bank under group ownership. It also welcomes the uniform T+2 settlement requirement. Concerning the target of completing the dematerialisation of tradable securities by 2020, EESC says there is a need for political compromise given the uneven progress made by different Member States. (Source: Opinion of the EESC on the CSD Regulation)

Contact: Rosali Pretorius or Matthew Sapte.

European Securities and Markets Authority (ESMA)

ESMA updates short selling Q&A: ESMA has updated its short selling Q&A in relation to the duration adjustment issue for calculating net short positions in sovereign debt, and to the calculation and reporting for the specific situation of group and fund management activities. (Source: ESMA Updates Short Selling Q&A)

Contact: Rosali Pretorius or Matthew Sapte.

European Banking Authority (EBA)

EBA Stakeholder Group warns of liquidity rules dangers: EBA's Banking Stakeholder Group has published a position...