SCANNING 14

What’s next? The general report is submitted to the Commission and is expected to be reviewed by the European Parliament shortly. MiFID II MiFID II/MiFIR draft Technical Standards on authorisation, passporting, registration of third country firms and cooperation between competent authorities Background On 15 May 2014, Directive 2014/65/EC on markets in financial instruments (“MiFID II”) ( AVAILABLE HERE ) was adopted by the European Parliament and Council. MiFID II delegate and confer powers to the European Commission to adopt regulatory technical standards (RTS) and implementing tech- nical standards (ITS) on various topics. On 19 December 2014, ESMA issued a discussion paper (ESMA 2015/548) ( AVAILABLE HERE ) with the aim to develop (i) implementing measures in respect of the authorisation of investment firms and (ii) to adjust MiFID provisions and procedures for passporting to existing standards. The consul- tation period closed on 2 March 2015. What’s in there? On 29 June 2015, ESMA published a final report (FR) on the authorisation, passporting, registration of third country firms and on the cooperation be- tween competent authorities (ESMA 2015/1006) ( AVAILABLE HERE ). This FR is composed of 4 draft regulatory technical standards ("RTS") and 2 draft implementing tech- nical standards ("ITS"), the response to the con- sultation paper as well as a cost-benefit analysis. This news focuses on RTS and ITS' content.

systemic importance while greatly simplifying the process and reducing the compliance costs for the majority of small and medium NFCs, which pose limited risks to the system overall. 2. Limiting Pro-cyclicality (Report No.2) - ESMA suggests to further specify rules for im- plementing the counter- cyclical tools adopted by CCPs for margins and collateral, including regular testing and transparency on the results to further improve their effectiveness. 3. Segregation and Portability (Report No.3 ) - ESMA identifies differences in CCP practices in the implementation of the relevant provisions. In order to promote convergent practices and achieve a level playing field, ESMA recom- mends for the introduction of clarifications and more detailed requirements through the use of Regulatory Technical Standards (RTS), along with incentives related to margin period of risk depending on the safety of the chosen account structure. Furthermore, proposals to monitor the take- up of the different types of account models to confirm adequacy and efficiency have been put forth by ESMA. In Response to the Commission’s EMIR Review, ESMA has provided recommendations to amend the EMIR framework in a number of areas. These include: « The amendment of EMIR to streamline the pro- cess for determining clearing obligations and to introduce tools that allow the suspension of the clearing obligation in cases of certain market conditions. The removal of frontloading require- ment is also recommended; « Rethinking of the entire equivalence and rec- ognition process of the third country CCPs. This would increase its efficiency and effectiveness, as well as to better respond to regulatory differ- ences between third countries. It is proposed that the jurisdiction decision should be governed by RTS. Any recognition process should also include additional risk- based considerations to allow it to deny or suspend the recognition of a third country CCP; « To improve the supervision of Trade Repositories by changing ESMA’s supervisory and enforce- ment powers and procedures. These include in- creases in fine levels, broadening of the enforce- ment decisions available to ESMA, appropriate timeframes to consider applications in the reg- istration process and clarifying TR’s obligations in relation to data quality and reconciliation and supervisory reporting.

The draft RTS1 sets forth the rules pertaining to the documentation to be provided by firms seeking for authorisation under MiFID. « The draft ITS2 set out common standards templates and procedure to ensure a uniform mechanism in respect of the authorisation of investment firms. It is accompanied by 3 tem- plates: “Application form for authorisation as an Investment Firm”, “List of members of the man- agement body” and “Notification on changes to the membership of the management body”. « The draft RTS3 concerns information that invest- ment firms should notify to the competent home authorities if they wish to perform investment ac- tivities or investment services in another Member State. « The draft ITS4 sets out the rules that investment firms have to follow when providing investment or services under the right of freedom to provide services or under the right of establishment. It sets out the standard forms, procedure and tem- plates required. It is accompanied by 13 tem- plates concerning “forms for the passport notifi- cation”, “form for the communication notification between competent authorities” and “form for the termination of the operation of a branch or the cessation of the use of a tied agent estab- lished in another Member State”. « The draft RTS5 sets out the necessary informa- tion for registration of a third country firms and the format of information to be provided to the client. « The draft RTS6 concerns the exchange of in- formation between competent authorities when cooperating in supervisory activities, on-the-spot verification and investigations in order to monitor market participants. What’s next? A decision of the Commission in respect of the en- dorsement of the draft RTS and ITS is expected at the beginning of Q4 2015.

page 8 - Scanning - September 2015