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- October 10, 2024
INVESTMENT SERVICES & CAPITAL MARKETS
MIFID and MIFIR
ESMA announces next steps for the selection of Consolidated Tape Providers
On 30 September 2024, publishing additional details on the selection of Consolidated Tapes Providers (CTPs) for bonds and for shares and Exchange-Traded Funds (ETFs).
ESMA will launch the selection procedure for the CTP for bonds on Friday 3 January 2025. ESMA intends to adopt a reasoned decision on the selected applicant within 6 months of the launch, i.e. by early July 2025.
In June 2025, ESMA will launch the selection procedure for the CTP for shares and ETFs with the objective to adopt a reasoned decision on the selected applicant by the end of 2025.
This announcement on the launch dates of the first selection procedures for the CTP for bonds and equities aims to foster a successful competition with multiple solid offers in transparent and fair selection procedures.
By way of background, in May 2024, ESMA published a Consultation Paper on draft technical standards related to the CTPs and on the specifications of the assessment criteria for the CTP selection procedure.
In December 2024, prior to the launch of the first selection procedure, ESMA will publish a feedback statement on this Consultation Paper, including the final draft technical standards that will be submitted to the European Commission.
ESMA launches new consultations on amendments to RTS on transaction data reporting and order book data under the MIFIR Review
On 3 October 2024, ESMA launched two consultations on the review of regulatory technical standards (RTS) on transaction data reporting and order book data under MIFIR Review.
ESMA is seeking input on the amendments to the RTS for the reporting of transactions and to the RTS for the maintenance of data relating to orders in financial instruments.
The consultation paper contains two different parts each covering one draft technical standard: (i) proposed amendments to RTS 22 in relation to transaction reporting and (ii) proposed changes to RTS 24 in relation to order book data.
In relation to transaction reporting, the MIFIR Review amended the scope of financial instruments and the information to be reported. In addition to the proposed changes to fulfil its mandate, ESMA is proposing additional enhancements on various aspects such as the identification of transactions in distributed ledger technology (DLT) financial instruments and extension of the scope for transmission of an order agreement.
In relation to order book data, ESMA must specify the format of the order book data reporting by trading venues.
ESMA states that these RTS are relevant to enhance the information available to stakeholders by improving, simplifying and further harmonising data reporting requirements. The implementation of the revised standards should also result in an overall reduction of the reporting burden for market participants that are subject to different reporting regimes.
The consultations are aimed at Market Participants, Trading Venues, and Investment Firms National Competent Authorities (NCAs).
ESMA will consider the feedback received to both consultations by 3 January 2025.
After reviewing the feedback received, ESMA will publish a final report and submit the draft technical standards to the European Commission by the end of Q2 2025.
More information to support stakeholders in this transition is available on this webpage centralising the information published in relation to MIFID II/MIFIR review.[/vc_column_text][/vc_column][/vc_row][/vc_section][vc_section css=”.vc_custom_1609007282200{margin-bottom: 20px !important;}”][vc_row css=”.vc_custom_1609007241176{padding-right: 15px !important;padding-left: 15px !important;}”][vc_column css=”.vc_custom_1612794217189{margin-bottom: 20px !important;padding-top: 3px !important;padding-right: 20px !important;padding-bottom: 3px !important;padding-left: 20px !important;background-color: #283a66 !important;}”][vc_column_text]
DIGITAL OPERATIONAL RESILIENCE ACT (DORA)
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]ESAs appoint Director to lead their DORA joint oversight
The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) have appointed Marc Andries to lead their new joint Directorate in charge of oversight activities for critical third-party providers established by the Digital Operational Resilience Act (DORA). Marc Andries takes up his new role as Director for DORA joint oversight on 1 October 2024.
In his role as DORA Joint Oversight Director, Marc Andries will be responsible for implementing and running an oversight framework for critical information and communication technologies (ICT) third-party service providers (CTPPs) at a pan-European scale, contributing to the smooth operations and stability of the EU financial sector. [/vc_column_text][/vc_column][/vc_row][/vc_section][vc_section css=”.vc_custom_1609007282200{margin-bottom: 20px !important;}”][vc_row css=”.vc_custom_1609007241176{padding-right: 15px !important;padding-left: 15px !important;}”][vc_column css=”.vc_custom_1612794217189{margin-bottom: 20px !important;padding-top: 3px !important;padding-right: 20px !important;padding-bottom: 3px !important;padding-left: 20px !important;background-color: #283a66 !important;}”][vc_column_text]
SUSTAINABLE FINANCE
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Sustainable Finance
ESMA publishes translations of its Guidelines on funds’ names
On 21 August 2024, ESMA published the translations in all official EU languages of its Guidelines on funds’ names using ESG or sustainability-related terms.
The Guidelines will start applying three months after this publication, i.e. on 21 November 2024.
Within two months of the date of publication of the Guidelines, i.e. on 21 October 2024, national competent authorities must notify ESMA whether they (i) comply, (ii) do not comply, but intend to comply, or (iii) do not comply and do not intend to comply with the guidelines.
The transitional period for funds existing before the application date will be six months after that date, i.e. 21 May 2025. Any new funds created on or after the application date should apply these Guidelines immediately.
The objective of the Guidelines is to ensure that investors are protected against unsubstantiated or exaggerated sustainability claims in fund names, and to provide asset managers with clear and measurable criteria to assess their ability to use ESG or sustainability-related terms in fund names.
Corporate Sustainability Reporting Directive (CSDR)
Commission provides further clarifications on EU corporate sustainability reporting rules
On 7 August 2024, the European Commission published a draft Commission Notice on the interpretation of certain legal provisions in the Accounting Directive, Audit Directive, Regulation Audit Regulation, Transparency Directive, Regulation (EU) 2023/2772 (which contains that first set of European Sustainability Reporting Standards), and the SFDR as regards sustainability reporting.
The notice contains a set of replies to frequently asked questions (FAQs) to support stakeholders in the implementation of the EU corporate sustainability reporting rules. The publication is part of the Commission’s continuous effort to make the EU sustainable finance framework more usable for companies and reduce the administrative burden on them.
The FAQs take into account input received from companies and cover issues such as the scope of the rules, application dates, and exemptions. For example, they clarify when companies may use estimates rather than having to collect value chain information from suppliers or partners.
The FAQs includes (among others) questions addressing: (i) sustainability information reporting under Articles 19a and 29a of the Accounting Directive; (ii) sustainability information reported under Article 40a of the Accounting Directive; (iii) assurance of sustainability reporting; (iv) key intangible resources disclosures; (v) additional FAQs on requirements for third-country undertakings; and (vi) the correlation between indicators published under CSRD and those published under SFDR.
The Corporate Sustainability Reporting Directive is a cornerstone of the EU’s sustainability agenda and the European Green Deal. It has modernised and strengthened the rules about the social and environmental information that companies have to report. The Directive entered into force on 5 January 2023. The first set of companies subject to the new rules must start reporting in 2025, for the financial year 2024.[/vc_column_text][/vc_column][/vc_row][/vc_section][vc_section css=”.vc_custom_1609007282200{margin-bottom: 20px !important;}”][vc_row css=”.vc_custom_1609007241176{padding-right: 15px !important;padding-left: 15px !important;}”][vc_column css=”.vc_custom_1612794217189{margin-bottom: 20px !important;padding-top: 3px !important;padding-right: 20px !important;padding-bottom: 3px !important;padding-left: 20px !important;background-color: #283a66 !important;}”][vc_column_text]
EUROPEAN SUPERVISORY AUTHORITIES
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]ESAs warn of risks from economic and geopolitical events
In August 2024, the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) presented issued their Autumn 2024 Joint Committee Report on risks and vulnerabilities in the EU financial system.
The report underlines ongoing high economic and geopolitical uncertainties. The ESAs warn national supervisors of the financial stability risks stemming from these uncertainties and call for continued vigilance from all market participants.
The Joint Committee advises the ESAs, national competent authorities, financial institutions, and market participants to take the following policy actions:
- Financial institutions and supervisors should remain prepared for facing the impacts of continued high interest rates on the real economy. Higher re-financing costs will continue to challenge the real economy and financial markets. The full effect will materialise over time, particularly with refinancing needs remaining elevated in coming years, with certain firms being more vulnerable, such as the highly-indebted and those with weak cashflows.
- Credit risk should continue to be monitored and carefully managed as its potential crystallisation remains a concern. This includes adequate provisioning levels and forward-looking provisioning policies, while prudent and up-to-date collateral valuation remain important. Amid rapid expansion of private credit, transparency for non-bank lenders should be improved, while their risk management and loan origination standards may require further scrutiny.
- With ongoing deep uncertainties and recent increases in asset valuations, financial institutions need to be flexible and agile and have proper plans and processes in place to address unexpected short-term multi-fold challenges, particularly sudden changes arising from geopolitical risks, which can materialise though many channels, such as credit risk, market corrections and operational risks.
- Financial institutions and supervisors should remain vigilant regarding the impact of inflation on product development. Financial institutions and supervisors should ensure that consumers are aware of the effects of inflation on real returns in the context of savings and investments generally.
- Financial institutions and supervisors should remain vigilant to operational and financial stability risks that could arise from cyber-risks, as exemplified by the global IT disruption in July from the failed update by a widely used cybersecurity company (CrowdStrike). Cyberattacks have been increasing, including successful ones, and the sophistication of attacks is growing, also shows the extent of vulnerabilities to operational risks.
ESMA 2025 Annual Work Programme: Focus on key strategic priorities and implementation of new mandates
On 1 October 2025, ESMA published its 2025 Annual Work Programme. ESMA’s multi-annual Strategy covering the period 2023-281 (ESMA Strategy), which establishes three strategic priorities (Fostering effective markets and financial stability; Strengthening supervision of EU financial markets; Enhancing protection of retail investors) and two thematic drivers (Enabling sustainable finance and Facilitating technological innovation and effective use of data).
A significant portion of ESMA’s work in 2025 will comprise policy work to facilitate the implementation of a large number of mandates received in the previous legislative cycle, and the preparation of new mandates, such as the European Green Bonds and the ESG Ratings Providers Regulations. Following the adoption of EMIR 3, ESMA will take on new responsibilities and develop a substantial number of technical standards.
2025 will see the selection and authorisation of the first Consolidated Tape Provider, the effective implementation of Markets in Crypto-Assets Regulation (MICA) (which institutes uniform EU market rules for crypto-assets) to ensure adequate protection for investors and ensure convergent supervisory approach for crypto assets service providers.[/vc_column_text][/vc_column][/vc_row][/vc_section][vc_section css=”.vc_custom_1609007282200{margin-bottom: 20px !important;}”][vc_row css=”.vc_custom_1609007241176{padding-right: 15px !important;padding-left: 15px !important;}”][vc_column css=”.vc_custom_1612794217189{margin-bottom: 20px !important;padding-top: 3px !important;padding-right: 20px !important;padding-bottom: 3px !important;padding-left: 20px !important;background-color: #283a66 !important;}”][vc_column_text]
CySEC DEVELOPMENTS
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_single_image image=”8217″ img_size=”full” alignment=”center”][vc_column_text]Policy Statement PS-01-2024: Policy Statement on the enhancement of the non-face-to-face customer onboarding process with electronic methods
On 6 August 2024, CySEC issued PS-01-2024 to inform Regulated Entities of the new rules outlining the further facilitation, establishment and incorporation of electronic methods and technologies in the process of remote Customer Due Diligence under the AML/CFT legislation. Through the Policy Statement CySEC also informs Regulated Entities of the amendments made to the AML Directive, incorporating the new rules on the remote customer onboarding solutions, which will come into application on 1 December 2024. Regulated Entities wishing to utilising remote customer onboarding solutions shall notify CySEC about their intention by submitting the Notification Form included as Annex III in the Policy Statement.
Circular C655: Findings of the assessment of Compliance Officers’ Annual Reports and Internal Audit Reports on the prevention of money laundering and terrorist financing, for the year 2022
On 7 August 2024, CySEC issued Circular C655 to inform Regulated Entities of its assessment findings of the Compliance Officers’ Annual Reports and Internal Audit Reports on the Prevention of Money Laundering and Terrorist Financing, for the year 2022. Through the circular, CySEC sets out some commonly identified weaknesses and deficiencies, reminding also the Regulated Entities of their obligations.
Circular C656: Common weakness/deficiencies and good practices identified during the inspections performed in relation to the prevention of money laundering and terrorist financing
On 8 August 2024, CySEC issued Circular C656 to inform Regulated Entities of the common weaknesses/deficiencies and good practices identified during its inspections performed in the years 2022 and 2023. Regulated Entities are expected to take note of the contents of the circular and take necessary steps to ensure that their policies, controls and procedures align with their risk profiles and are in compliance with the AML/CFT legislation.
Circular C659: Fractionalisation of Shares
On 26 September 2024, CySEC issued Circular C659 to provide guidance on the cases where fractional exposure in shares in companies would qualify as exposure in Shares per se. Moreover, through the circular CySEC outlines its expectations in the cases where CIFs utilise trust arrangements for the fractional beneficial ownership of shares and the relevant regulatory obligations.[/vc_column_text][/vc_column][/vc_row][/vc_section]