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Legal Shorts 21.04.17 including MiFID II: European Parliament concerns about SIs and EMIR: ESMA opinion on portfolio margining

Published: 21 Apr 2017

Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers. 

Claire Cummings

020 7585 1406




MiFID II: European Parliament concerns about SIs

The European Parliament's MiFID II negotiating team has published a letter to the European Commission setting out its concerns relating to systematic internalisers (SIs) operating broker crossing networks. Although the Commission did set out an approach to the problem in a March 2017 letter, the negotiating team remain concerned about a potential circumvention of the MiFID II framework and are of the view that the Commission's approach does not represent a sufficient reaction to the issue. The negotiating team expects the Commission to further investigate the matter as a priority and to commit to using legal instruments to address the problem i.e. a delegated act to adjust technical elements of definitions to market and technological developments.


EMIR: ESMA opinion on portfolio margining

ESMA has published an opinion on portfolio margining requirements under EMIR. A CCP may allow offsets or reductions in the required margin across the financial instruments that it clears if the price risk of one financial instrument or a set of financial instruments is significantly and reliably correlated, or based on equivalent statistical parameter of dependence, with the price risk of other financial instruments. ESMA's opinion clarifies when two contracts can or cannot be considered as the same instrument for the purpose of portfolio margining (for all asset classes) and clarifies that CCPs have to limit the reduction in margin requirement when portfolio margining different instruments.


EMIR: ESMA signs MoU with NZ regulators

ESMA has entered into a memorandum of understanding with each of the Reserve Bank of New Zealand and the Financial Markets Authority of New Zealand, which means that CCPs established in New Zealand will be able to provide clearing services to clearing members or trading venues established in the EU. The MoUs came into effect as of 28 February 2017.


FCA 2017/18 business plan

The FCA has published its 2017/18 business plan, which will focus on the following: (i) firms’ culture and governance; (ii) financial crime and AML; (iii) promoting competition and innovation; (iv) technological change and resilience; (v) treatment of existing customers; and (vi) consumer vulnerability and access to financial services. The FCA has also published for the first time its sector views for 2017, which highlight the issues and developments the FCA sees in the sectors it regulates.


FCA mission 2017

In addition to its business plan above, the FCA has also published its Mission 2017, together with a feedback statement (FS17/1) outlining the FCA's overall responses to its consultation paper on its future mission. The FCA notes that the considerable feedback was generally positive. The Mission sets out, at a high-level, the framework for the strategic decisions the FCA makes, the reasoning behind its work, and the way it chooses which tools to use.


FCA publishes minutes of February board meeting

The FCA has published the minutes of its board meeting on 22 and 23 February 2017, which included discussions on the following: (i) the objectives and preferred attributes that would be sought in a candidate for digital technology leadership; (ii) the work being undertaken in preparation for Brexit, including the first meeting of the joint HM Treasury and FCA Senior Steering Board in January 2017; and (iii) issues relating to LIBOR benchmark panels. The board noted the planned publication of a consultation paper in March 2017 that aimed to establish a more stable basis for LIBOR.


New FCA webpage on durable medium

The FCA has set up a new webpage which aims to clarify the meaning of durable medium, as well as explaining its origin, purpose and interpretation. The FCA points out that it is essential for firms to understand their obligations when using non-paper methods of communication, and how they might meet those obligations. The FCA is proposing to update the Handbook definition of durable medium by removing references to outdated media.


FCA occasional paper on financial promotion

The FCA has published a paper on behavioural insights into the advertising of financial products, which builds on its earlier work into behavioural biases. It summarises a large body of academic literature to explore the mechanisms behind consumer attention, understanding and behaviour. The FCA builds this into a framework for understanding how consumers process information in the form of advertisements. The FCA then applies its findings by looking at what the science says about an advert that may be unclear, unfair or misleading. The FCA advises that understanding psychology and how consumers process information is crucial to understanding the impact of advertisements and identifying when they might be unclear, unfair or misleading.


Project Innovate update

The FCA has published a speech which sets out what the next phase of Project Innovate will involve. Points of interest include: (i) the FCA is working more deeply with innovators than this time last year and has received more applications for the second cohort of its sandbox than for the initial cohort; (ii)  the FCA's Advice Unit, which currently assists firms developing automated advice models, will now have a broader approach, taking in firms within the mortgage, general insurance and debt sectors, as well as firms that want to provide guidance instead of regulated advice; and (iii) the Innovate team has been asked to do more to lead the conversation about emerging trends and innovations.


Benchmarks Regulation

The FCA has published an update on the Benchmarks Regulation, which highlights the content of ESMA's final report, published in March 2017, containing the majority of the final draft RTS and ITS required under the Benchmarks Regulation. The FCA also notes that it plans to publish its consultation paper on UK implementation of the Benchmarks Regulation (which will cover forms) "over the coming months".


EONIA framework

The European Money Markets Institute (EMMI), the EONIA benchmark administrator, has announced that it has adopted an overarching governance framework for EONIA. The framework specifies the governance and control framework for EONIA, including the obligations of parties that play a role in its determination. It is in line with regulatory requirements and comprises the following elements: (i) the governance code of conduct; (ii) the code of obligations of panel banks; (iii) the code of obligations of calculation agent; and (iv) the benchmark determination methodology. The EONIA governance framework will enter into force on 1 August 2017.


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Tel: + 44 20 7585 1406

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21 April 2017

Firm: Addleshaw Goddard

Practice Area: Trade & Customs

  • 42 Brook Street
    W1K 5DB

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