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Euro Shorts 28.04.17 including European Commission speech on Brexit and challenges for EU financial services policy

Published: 28 Apr 2017

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

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



European Commission speech on Brexit and challenges for EU financial services policy 

The European Commission has published a speech relating to challenges for EU financial services policy. The speech considers the implications of the UK's departure from the EU for financial services, focusing on the following issues: (i) equivalence -  the EU intends to continue to make active use of the equivalence model, but it is not a right for all third countries and the EU will consider every case on its own merit; (ii) supervisory convergence – the speech warns of the risks of a race to the bottom among financial supervisors to win over business in the aftermath of Brexit and that the work of the European Supervisory Authorities (ESAs) to increase supervisory convergence must be accelerated to address these risks.

MiFID II: AFME questionnaire on fixed income and currencies  

The Association for Financial Markets in Europe has published a questionnaire providing a standardised set of questions that can be sent bilaterally by MiFID II investment firms to trading venues (i.e. MTFs and OTFs), together with a related webpage. The questions in the questionnaire relate to separate aspects of the MiFID II markets regime and, although the questionnaire is aimed at fixed income and currencies (FIC) products, it contains some cross-asset considerations that may be relevant for other instruments. AFME has also recently published a questionnaire that could be sent by MiFID II investment firms to EU equities exchanges in the scope of MiFID II.

EMIR: no objection to delaying clearing obligation for certain financial counterparties 

The European Parliament has raised no objection to the Delegated Regulation adopted by the European Commission relating to the EMIR clearing obligation in March 2017. The Delegated Regulation prolongs the phase-in period for financial counterparties with a limited volume of OTC derivatives activity by two years. It amends three EMIR Delegated Regulations which had specified start dates of 21 June 2017 for OTC interest rate derivatives denominated in EUR, GBP, JPY, and USD and 9 February 2018 for OTC index credit default swaps and OTC interest rate derivatives denominated in NOK, PLN and SEK. The new start date for the clearing obligation for financial counterparties with a limited volume of OTC derivatives activity (that is, those counterparties classified in category 3 under the Delegated Regulation) will be 21 June 2019.

EMIR: ESRB report revision of EMIR  

The European Systemic Risk Board has published a report on the revision of EMIR. The ESRB's comments include the following: (i) it welcomes the European Commission's November 2016 report on the outcome of its EMIR review; in particular it supports the Commission's plan to revise EMIR to include an emergency mechanism for swiftly suspending the clearing obligation and to increase the transparency and predictability of margin requirements; (ii) it agrees that no fundamental change to EMIR is needed at present, although it does recognise that some aspects could be improved; (iii) although it recognises the difficulties faced by some counterparties in meeting the clearing obligation, it supports a broad application of the obligation, including for pension scheme arrangements and large non-financial counterparties (NFCs) that are active in the derivatives market; and (iv) a comprehensive review of EMIR will be needed in the future, which should address issues such as the potential use of margins and haircuts to meet macroprudential objectives when the analysis needed to develop these tools has progressed.

ESMA final report on TR fees 

ESMA has published its final report on technical advice to the European Commission about fees for trade repositories (TRs) under the SFT Regulation and on certain amendments to the fees under EMIR. ESMA is proposing some changes to the way ESMA's fees for TRs are calculated under EMIR and the SFTR to ensure a level playing field across both Regulations. ESMA intends to submit the final report to the Commission by the beginning of the second quarter of 2017.

Market Abuse Regulation  

ESMA has published an opinion on points for convergence in relation to accepted market practices (AMPs) on liquidity contracts under the Market Abuse Regulation. Under MAR, an exception is available to the general prohibition of market manipulation where a person establishes that the transaction, order or behaviour in question has been carried out for legitimate reasons and that it conforms with an AMP established in accordance with MAR. ESMA has decided that it would be helpful to develop a common approach in establishing the AMPs on liquidity contracts and the safeguards to be provided by those AMPs. In its opinion, ESMA sets out points for convergence, setting out conditions and limits that should be taken into account by competent authorities when establishing AMPs on liquidity contracts. These points for convergence relate to: (i) the financial instruments in scope; (ii) the form of the contract; (iii) the performance of the contract; (iv) the liquidity of instruments covered by the AMP; (v) trading conditions; and (vi) resources allocated to the performance of liquidity contracts.

Money Market Funds Regulation 

The EU Council has published the text of the proposed Regulation on Money Market Funds (MMF Regulation), which was adopted by the European Parliament at the beginning of April 2017. The next step is for the MMF Regulation to be formally adopted by the Council. It will then be published in the Official Journal and enter into force 20 days after its publication. The adopted text states that the MMF Regulation shall apply from the date twelve months after the date of entry into force, with the exception of a number of Articles (that is, Articles 11(4), 15(7), 22 and 37(4)), which shall apply from the date of entry into force.


The European Parliament's Committee on Economic and Monetary Affairs (ECON) has voted to adopt a draft report on FinTech, which was published in February 2017. The report's conclusions include the following: (i) defining an EU framework for FinTech intended to promote a competitive financial system, financial stability and consumer and investor protection; (ii) the need for consistent, technology-neutral application of existing data legislation; (iii) the prevalence of cyber-security and information and communication technology risks; (iv)  the importance of FinTech services within the EU and engagement with third countries on interoperability; and (v) consumer and investor protection. The report is addressed towards the Commission and the EU Council and presumably intended to be considered in the context of the Commission's March 2017 consultation paper on FinTech.

Dealers back SONIA as alternative to LIBOR 

According to reports, major dealers have backed the broader use of SONIA as an alternative to Libor. The Bank of England took over responsibility for SONIA in 2016 and it has confirmed that a working group of major dealers voted this month to recommend the use of SONIA over two other "near risk-free" alternatives. The Bank believes that support for SONIA, the sterling overnight index average, will improve the resilience of the financial system and said that work must now begin on planning for the widespread adoption of SONIA, in consultation with a broader set of market participants. The recommendation will be put to a market consultation in the middle of this year.

We   have taken great care to ensure the accuracy of this version of Euro Shorts.   However, Euro Shorts is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the   information it contains. No responsibility can be taken for any loss arising from, action taken or refrained from on the basis of this publication. If you   would like to be removed from the mailing list of this publication please click unsubscribe below. Nothing within this communication may be copied, re-printed or similar without prior written consent from Cummings.

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Tel: + 44 20 7585 1406

Mob: + 44 7734 057 327


28  April 2017

Firm: Addleshaw Goddard

Practice Area: Trade & Customs

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