July 5, 2020

Volume X, Number 187

July 03, 2020

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ESMA Updates Transparency Opinions, MiFID II Q&As & Clearing Services Commercial Terms

ESMA Publishes Report on FR Commercial Terms for Clearing Services

On June 2, the European Securities and Markets Authority (ESMA) published a final report setting out technical advice to the European Commission (EC) on the fair, reasonable, non-discriminatory and transparent (FRANDT) commercial terms for the provision of clearing services (the Report).

In the Report, ESMA sets out how conditions under which the commercial terms for the provision of clearing services are to be determined as FRANDT. In doing so, ESMA aims to balance the need to improve clearing clients’ access to clearing services and ensure that these services are provided on FRANDT compliant terms, while also ensure that the requirements are proportionate and within their mandate.

ESMA notes that the requirements covered in the technical advice address concerns of clearing clients and clearing service providers and aim to:

  1. facilitate comparability of the information disclosed;

  2. address the process of onboarding clearing clients;

  3. standardize the information disclosed to clients bilaterally; and

  4. encourage further standardization of contractual terms.

EMIR Refit introduced a requirement for clearing members and clients who provide clearing services to do so under FRANDT terms by June 2021. The EC was mandated to develop a delegated act specifying the conditions under which commercial terms are to be considered to be FRANDT terms and asked ESMA to provide technical advice on the FRANDT terms as input for developing the delegated act.

The Report has now been sent to the EC.

The Report is available here.

ESMA Updates Opinions on Transparency and Position Limits for Third-Country Trading Venues

On June 3, the European Securities and Markets Authority (ESMA) published updated versions of its opinions on transparency (Transparency Opinion) and position limits (Position Limits Opinion) for third-country trading venues (TCTVs) under MiFID II and MiFIR.

The Transparency Opinion:

The Transparency Annex to the Transparency Opinion includes a list of 137 TCTVs from 25 countries. Most have a positive assessment for all the instruments available on the venue, while several have a partially positive assessment (the assessment is limited to a subset of instruments).

Firms concluding transactions on TCTVs absent from the list should make those transactions post-trade transparent via an approved publication arrangement (APA) by October 3. ESMA clarifies that firms are subject to the same obligations for transactions executed on TCTVs with a partially positive assessment, but only for the instruments exempted from the positive assessment.

The Position Limits Opinion:

The Position Limits Annex includes a list of seven TCTVs from four countries. All TCTVs on this list have a fully positive assessment. ESMA notes that this means commodity derivatives traded on TCTVs on this list should not be considered as economically equivalent OTC contracts for the purposes of the position limits regime. ESMA confirms that each assessment of these TCTVs has been individually approved by ESMA prior to inclusion on the general list.

Although ESMA considers that this exercise has been finalized, it remains open to future submissions from TCTVs, should they have European Union market participants who consider that an assessment would be relevant.

ESMA’s Transparency Opinion is available here, and the Transparency Annex is available here.

ESMA’s Position Limits Opinion is available here, and Position Limit Annex is available here.

ESMA Updates MiFID II Q&As on Market Structures

On May 29, the European Securities and Markets Authority (ESMA) published an updated version of its Q&As on MiFID II and MiFIR market structures topics (the Q&A).

The updated Q&A clarifies the authorization requirements of multilateral systems facilitating the execution of repurchase agreement transactions under MiFID II (Q&A 9b on multilateral and bilateral systems).

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 157


About this Author

Carolyn H. Jackson, International Attorney, Katten Muchin law firm

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws...

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring and documentation relating to OTC derivatives and structured products.

Prior to joining Katten, Nathaniel was a member of the US Regulatory and the Derivatives and Structured Finance practices at Allen & Overy LLP.

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...