Securities and markets regulatory news, March 2021 | Hogan Lovells

Contents

  • UK CCPs: HM Treasury consults on expanded resolution regime
  • GBP LIBOR in derivatives: Working Group paper
  • EU MiFIR II review: European Commission speech
  • EU MiFIR: ESMA 2020 annual report on application of waivers and deferrals for non-equity instruments
  • GameStop share trading: ESMA statement on regulatory implications
  • EU EMIR: ESMA final report on guidelines for consistency of CCP SREPs
  • EU BMR: ESMA consults on guidelines on methodology to calculate a benchmark in exceptional circumstances
  • Sustainable finance: IOSCO update

UK CCPs: HM Treasury consults on expanded resolution regime

HM Treasury is consulting on an expanded resolution regime for central counterparties (CCPs). HM Treasury intends to revise and expand the UK CCP resolution regime to bring it in line with international standards. This will involve giving the Bank of England (BoE) additional powers to mitigate the risk and impact of a CCP failure and the subsequent risks to financial stability and public funds.

A summary of the proposed new regime is set out in chapter 2 of the consultation paper, with further details set out in Annex A.

The deadline for responses is 28 May 2021. HM Treasury states that it will legislate to establish the expanded regime when parliamentary time allows.

GBP LIBOR in derivatives: Working Group paper

The Working Group on Sterling Risk-Free Reference Rates has published “Path to ending new use of GBP LIBOR-linked derivatives“, a paper aimed at helping market participants meet its 2021 quarterly milestones for ending new use of GBP LIBOR in derivatives. Alongside the paper, the Working Group also published an update version of its “Priorities and roadmap for transition by end-2021” document.

EU MiFIR II review: European Commission speech

The European Commission has published a speech by Mairead McGuinness, European Commissioner for Financial Services, Financial Stability, and Capital Markets Union (CMU). In the speech, among other things, Commissioner McGuiness considers next steps on the Commission’s review of the Markets in Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation (MiFIR) (together, MiFID II).

Commissioner McGuiness states that the Commission intends to adopt a legislative proposal relating to the review of MiFID II at the end of 2021. She also discusses some of the issues that the proposal may address.

EU MiFIR: ESMA 2020 annual report on application of waivers and deferrals for non-equity instruments

The European Securities and Markets Authority (ESMA) has published its annual report for 2020 on the application of waivers and deferrals for non-equity instruments under MiFIR.

Under Articles 4(4), 7(1), 9(2) and 11(1) of MiFIR, ESMA is required to monitor the application of pre-trade transparency waivers and deterred trade-publication. As part of this mandate, ESMA submits an annual report to the European Commission on how equity and non-equity waivers and deferrals regimes are applied in practice. In the report, ESMA analyses waivers for non-equity instruments for which it issued an opinion to the relevant national competent authority (NCA) in the period between 1 January and 31 December 2019. The report includes an overview of the deferrals regime for non-equity instruments applied across the different EU member states.

ESMA will publish the next annual report in the second half of 2021 covering its analysis of the application of the waivers and deferrals regimes in 2020.

GameStop share trading: ESMA statement on regulatory implications

ESMA has published an introductory statement made by Steven Maijoor, ESMA Chair, to the European Parliament’s Economic and Monetary Affairs Committee (ECON) relating to GameStop share trading and related phenomena.

In the statement, Mr Maijoor considers the regulatory implications of the trading in GameStop shares in late January 2021. Mr Maijoor states that ESMA will monitor developments on this issue and may take further action where appropriate.

EU EMIR: ESMA final report on guidelines for consistency of CCP SREPs

Following its earlier consultation, ESMA has published a final report on guidelines to clarify common procedures and methodologies for the supervisory review and evaluation process (SREP) of CCPs by their NCAs.

Under Article 21(6) of the European Market Infrastructure Regulation (EMIR), which addresses the consistency of NCA SREPs for CCPs, ESMA is required to draw up guidelines for NCAs to specify the common procedures and methodologies for the SREP. This must be in a manner that is appropriate to the size, structure and internal organisation of CCPs, and the nature, scope and complexity of their activities.

The objective of the guidelines is to ensure consistency in format, frequency, and depth of CCP SREPs.

The guidelines will apply from the date they are published on ESMA’s website in the official EU languages. Once published, NCAs will have two months to notify ESMA whether they comply or intend to comply with the guidelines.

EU BMR: ESMA consults on guidelines on methodology to calculate a benchmark in exceptional circumstances

ESMA has published a consultation paper on draft guidelines under the Benchmarks Regulation (BMR). The guidelines aim to provide further guidance to market participants and competent authorities on the application of the requirements relating to the use of a methodology for calculating a benchmark in exceptional circumstances (such as the COVID-19 pandemic).

The consultation paper seeks input on clarifications and specifications regarding the adjustments of benchmarks in exceptional circumstances in relation to three areas:

  • transparency of methodology;
  • oversight function; and
  • record keeping requirements.

The draft guidelines also ensure that benchmarks administrators have in place a transparent framework when consulting on material changes to the methodology in a short time period. In addition, they amend the guidelines on non-significant benchmarks with regard to the key elements of the methodology and the oversight function.

The consultation ends on 30 April 2021. ESMA intends to publish, and apply, the final guidelines in Q3 2021.

Sustainable finance: IOSCO update

The International Organization of Securities Commissions (IOSCO) has published a press release reporting on progress made over the past year by its Sustainable Finance Task Force (STF). Among other things, IOSCO notes that it sees an urgent need to improve the consistency, comparability and reliability of sustainability reporting, with an initial focus on climate change-related risks and opportunities, which would subsequently be broadened to other sustainability issues.

IOSCO has identified three priority areas for improvement in sustainability-related disclosures by companies and asset managers: encouraging globally consistent standards; promoting comparable metrics and narratives; and coordinating across approaches.

IOSCO states that it is committed to working with the International Financial Reporting Standards (IFRS) Foundation Trustees and other stakeholders to advance these priorities, focusing on the following objectives:

  • establishing a sustainability standards board (SSB) under the IFRS Foundation structure with a strong governance foundation;
  • building on existing efforts in respect of the content of existing sustainability-related reporting frameworks; and
  • encouraging a “building blocks” approach to establishing a global sustainability reporting system.



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