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Legal Shorts 01.09.17 including MiFID II: New FCA webpage on position limits for commodity derivatives and MiFID II: EC adopts Delegated Regulation amending SI definition

Published: 01 Sep 2017

Claire Cummings

020 7585 1406



MiFID II: New FCA webpage on position limits for commodity derivatives

The FCA has published a new webpage on position limits for commodity derivative contracts under MiFID II. The webpage lists the commodity derivative contracts that the FCA has currently identified as trading on a UK trading venue which, from 3 January 2018, will have a bespoke position limit set against them. The list will be subject to change and firms are encouraged to check it regularly. Any other commodity derivatives not listed in the table and traded on a UK trading venue (but not traded in significant volumes on a venue in another member state) will, from 3 January 2018, be subject to a limit of 2,500 lots. The webpage includes notes that provide further clarification for firms.

MiFID II: EC adopts Delegated Regulation amending SI definition

The European Commission has adopted a Delegated Regulation amending the specification of the definition of systematic internalisers (SIs). The Commission consulted on the Delegated Regulation in June 2017 because of perceived ambiguities about the meaning of "trading on own account when executing client orders" and the new Article 16a now states: "An investment firm shall not be considered to be dealing on own account for the purposes of Article 4(1)(20) of Directive 2014/65/EU where that investment firm participates in matching arrangements entered into with entities outside its own group with the objective or consequence of carrying out de facto riskless back-to-back transactions in a financial instrument outside a trading venue.”

EMIR: ESMA publishes guidelines on transfer of data

ESMA has published a final report setting out guidelines on the transfer of data between trade repositories under EMIR. The guidelines apply to TRs registered or recognised by ESMA and aim to provide TRs with additional clarification on how to ensure compliance at all times with the following EMIR requirements: (i) Article 9(1), which requires counterparties and CCPs to ensure that the details of their derivative contracts are reported without duplication; (ii) Article 79(3), which requires a TR from which registration has been withdrawn to ensure orderly substitution, including the transfer of data to other TRs and the redirection of reporting flows to other TRs; and (iii) Article 80(3), which requires TRs to promptly record the information received under Article 9 and maintain it for at least 10 years following the termination of the relevant contracts. The guidelines will apply from 16 October 2017.

EMIR: ESMA publishes responses to its consultation on CCP conflicts of interest

ESMA has published the responses it has received to its June 2017 consultation on guidelines relating to the management by CCPs of conflicts of interest under EMIR. Respondents include the European Association of CCP Clearing Houses, ISDA and the Futures Industry Association (FIA). EMIR only contains generic provisions relating to CCPs' conflict of interest management. It requires CCPs to act in the best interests of their clearing members and the clients. As a result, CCPs need to have in place robust organisational arrangements and policies to prevent potential conflicts of interest, and to solve them if they occur. ESMA believes that further guidance would be beneficial and further facilitate supervisory convergence on this area. ESMA expects to publish the final version of the guidelines by the end of 2017.

EMMI publishes feedback on new reference index for euro repo market

The European Money Markets Institute has published the feedback it received to its June 2017 consultation on a new reference index for the euro repo money market.  Points of interest in the summary include: (i) all respondents provided feedback that EMMI’s proposed structure for the new repo index’s specification was appropriate; (ii) the majority of respondents agreed with EMMI’s proposal to consider repos conducted at a floating rate as eligible input; and (iii) in terms of use of the new repo benchmark, the feedback was mixed. There was overall praise for a secured benchmark being used, however there was concern regarding its potential to replace the Euro Overnight Index Average (EONIA), should this scenario ever become necessary. EMMI expects to publish information about the key features and characteristics of the index soon.

BEIS response to Green Paper on corporate reform

BEIS has published the government's response to the Green Paper consultation on corporate governance reform. The government identified a number of proposals for reform which it intends to take forward, including: (i) inviting the FRC to revise the UK Corporate Governance Code to set out the steps that companies should take when they encounter significant shareholder opposition to executive pay; (ii) inviting the FRC to consult on revising the Corporate Governance Code and its supporting guidance to give remuneration committees greater responsibility for demonstrating how pay and incentives align across the company; and (iii) to take forward plans to examine the use of share buybacks to ensure that they cannot be used artificially to hit performance targets and inflate executive pay. The FRC intends to consult on amendments to the Corporate Governance Code in late autumn and the current intention is to bring the reforms into effect by June 2018 to apply to company reporting years commencing on or after that date.

Brexit update

Guy Verhofstadt, who heads the European Parliament’s Brexit group, has said this week that he did not believe enough ground had been made on exit issues such as finance and citizens' rights to move on to trade next month. The third round of talks on the UK's exit are continuing in Brussels, but it has been suggested the two sides were not sharing information at the same rate. Mr Verhofstadt also claimed a transition deal could see the status quo for three years and that there was "more and more recognition" that the process of the UK's exit, due in March 2019, would need to be phased in to minimise upheaval. Mr Verhofstadt said the terms of any transition period had yet to be discussed, but that it could result in the prolongation of the UK's existing relationship for a period of up to three years.

SM&CR: FCA confirms advisers will fall off the FCA register

The FCA has published a consultation paper (CP17/25) to extend the Senior Managers & Certification Regime to almost all regulated firms.  This new regime will essentially replace the Approved Persons Regime and the aim of the new regime is to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence.  As part of this, the SM&CR aims to: (i) encourage a culture of staff at all levels taking personal responsibility for their actions; and (ii) make sure firms and staff clearly understand what is expected of them and can demonstrate where responsibility lies. According to a trade publication this week, the FCA has confirmed that all financial advisers who are not “senior managers” under the SM&CR will be taken off the FCA’s register. The trade publication went on to say that the FCA has confirmed that all CF30 certified workers, including financial advisers, will no longer be “approved” under its proposals i.e. they will no longer appear on the FCA register as regulated firms and individuals unless they are pre-approved as a senior manager.  The FCA defines senior managers as “the most senior people in a firm with the greatest potential to cause harm or impact upon market integrity”. Comments on the consultation are invited by 3 November 2017. The FCA proposes to consult separately on the operational aspects of the proposed SM&CR, including how firms will transition into it. The FCA expects to publish its final rules on the SM&CR in 2018.

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Tel: + 44 20 7585 1406

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1 September 2017

Firm: Addleshaw Goddard

Practice Area: Trade & Customs

  • 42 Brook Street
    W1K 5DB

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