Europe News
The latest industry and regulatory news affecting the EU and the UK
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IDB Consolidation
ICAP in November entered into an £1.1 billion ($1.63 USD) agreement to sell its brokerage business to Tullett Prebon. Although ICAP will retain some ownership of the combined company, the move marks a decisive shift away from ICAP's origins as a voice broker. Going forward, the company will focus primarily on two main lines of business: post-trade services and electronic markets.
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MiFID Delay
A one-year delay to the implementation of MiFID II/MiFIR is widely anticipated following a number of presentations and petitioning by regulatory officials at the European Securities and Markets Authority and the European Commission.
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Presentation from InfoNet: MiFID II/R seminar on Microstructural Issues
This Seminar focused primarily on the organisational requirements of investment firms engaged in algo trading, providing DEA and acting as GCMs (RTS 6) and also touched on key requirements from the organisational requirements for trading venues (RTS 7), market making agreements/schemes (RTS 8) and business clock synchronisation (RTS 25). The session also included this presentation from Norton Rose.
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Presentations from InfoNet: MiFID II/R seminar on Reporting
This seminar provided an update on the transaction reporting requirements under MiFID II. The FCA provided members with an up to date view on the requirements from a regulatory perspective and speakers from Norton Rose included a presentation providing an update on the requirements from a legal perspective.
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Presentations from InfoNet: MiFID II/R seminar on Investor Protection
The MiFID II/R Seminar investor protection included a presentation from speakers from Norton Rose Fulbright on the four aspects that will have the greatest effect on ETD markets. These are communication, information and analytics, systems and controls and product life cycle. David Dudeney from Trading Compliance then spoke about best execution, another subject high-up on the industry's list of concerns.
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Presentations from InfoNet: MiFID II/R seminar on Indirect Clearing
The MiFID II/R seminar on indirect clearing began with a presentation from Clifford Chance's Jeremy Walter, who explained the key issues with the requirements under MiFID II/R. A panel discussion followed, where participants representing legal, regulatory, infrastructure and practitioner views debated indirect clearing for ETD and OTC and the number of legal and operational complexities such as: territorial scope, account segregation options and longer chains as well as default management requirements which, for example, include porting and leapfrog payments.
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Presentations from InfoNet: MiFID II/R seminar on Transparency
The InfoNet MiFID II/R seminar on transparency focused on the final draft regulatory technical standards and the effect of the regulations on market participants and trading venues.
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Preparing for Remit
On Sept. 24, FIA issued a notice summarizing the registration and reporting requirements of the EU Regulation on Wholesale Energy Markets Integrity and Transparency (REMIT). FIA drafted the notice to help clearing firms inform customers who may have to comply with the new reporting obligation, which enters into force on Oct. 7 for certain exchange-traded wholesale energy products and on April 7 for certain over-the-counter energy products. Those products include futures, options and swaps based on electricity or natural gas for delivery in the European Union as well as contracts relating to the transportation of electricity or natural gas in the EU.
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Implementing Financial Reforms
On Sept. 28 the European Securities and Markets Authority published the final versions of its regulatory technical standards on three major pieces of financial reform legislation: MiFID II, the Market Abuse Regulation and the Central Securities Depositories Regulation. ESMA commented that the package of standards will implement many of the most important provisions in Europe’s post-crisis financial reforms.
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Moral Hazard
The European System of Central Banks issued a statement on Aug. 25 expressing opposition to any change in EU regulations that would give central counterparties an automatic right of access to central bank liquidity. The statement emphasized that the current legal framework allows each central bank to determine for itself which facilities it wishes to offer to CCPs and defines the conditions for such access. An automatic right to central bank liquidity “would create moral hazard on an extraordinary scale,” the ESCB warned. The statement was issued in response to a European Commission consultation on possible changes to EMIR.
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