Contents

• Download the full regulatory news bulletin
• UK Short Selling Regulation: notification threshold
• EU SRR: ESMA COVID-19 temporary notification threshold
• Mass-marketing of speculative illiquid securities: FCA PS20/15 confirms permanent ban
• Cryptoasset businesses: FCA temporary registration regime
• UK MiFIR transparency regime: FCA update for end of transition period
• MiFIR: Implementing Decision amending earlier Decision recognising certain Singapore derivatives trading venues
• MiFID: European Commission adopts Delegated Regulation on thresholds for weekly position reporting
• Draft Regulation on recovery and resolution of CCPs: Council of the EU publishes text
• CSDR: ESMA to recognise Euroclear UK & Ireland Limited as a third country CSD
• ESMA scheduled IT maintenance on databases and systems at end of Brexit transition period
• CRAs: ESMA 2020 report on market share calculation
• MMF Regulation: ESMA updates guidelines on stress tests
• FICC Market Standards Board draft standards

Following a seasonal break, the next update will be published on 11 January 2021

UK Short Selling Regulation: notification threshold

HM Treasury has announced that it intends to lay a statutory instrument under the retained EU law version of the Short Selling Regulation (UK SSR) amending the initial notification threshold under Article 5(2) for the reporting of certain net short positions to the UK Financial Conduct Authority (FCA). The threshold is in relation to the issued share capital of a company that has shares admitted to trading on a trading venue and it will change from 0.2% to 0.1%. The change will come into force on 1 February 2021.

The FCA has updated its webpage on the notification and disclosure of net short positions to reflect the change. It also explains that from the end of the Brexit transition period until the statutory instrument comes into effect, the notification threshold for issued share capital of a company that has shares admitted to trading on a UK trading venue (UK regulated markets and UK MTFs) will be 0.2%. However, during this period, position holders will continue to be able to make notifications to the FCA at the lower 0.1% threshold if they wish to do so.

See below for details of the decision of the European Securities and Markets Authority (ESMA) to extend the 0.1% temporary threshold.

EU SRR: ESMA COVID-19 temporary notification threshold

On 17 December 2020, ESMA published a decision (dated 16 December 2020) renewing the temporary requirement for the holders of net short positions in shares traded on an EU regulated market to notify the relevant national competent authority if the position reaches or exceeds 0.1% of the issued share capital.

In accordance with Article 28(10) of the EU Short Selling Regulation (EU SRR), ESMA is required to review the requirement, which was originally imposed in a decision published in March 2020 and subsequently renewed in June 2020 and September 2020. Following its review, ESMA has decided to renew the measure for an additional three months – from 19 December 2020 until 19 March 2021.

Mass-marketing of speculative illiquid securities: FCA PS20/15 confirms permanent ban

Following its consultation in CP20/8, the FCA has published a policy statement, PS20/15, confirming that it plans to make its temporary ban on the mass-marketing of speculative illiquid securities (including speculative mini-bonds) permanent and extend its scope. PS20/15 summarises the feedback the FCA received on CP20/8 and sets out its final policy position and Handbook rules.

Having considered the consultation feedback, which was mostly supportive, the FCA is confirming the rules as consulted on. It has made some minor changes and clarifications to ensure the final rules give effect to the policy intention explained in CP20/8. These changes are mainly clarifications on the scope of the intervention.

The new rules will take effect from 1 January 2021. The FCA states it will evaluate the success of the rules through its supervisory and monitoring activities.

Cryptoasset businesses: FCA temporary registration regime

The FCA has established a temporary registration regime for certain existing cryptoasset businesses that have applied to it for registration under the Money Laundering Regulations 2017, where the applications are still being assessed by the FCA. This is to enable those businesses to continue to trade after 9 January 2021 until 9 July 2021, pending the FCA's determination of their application.

According to the FCA, the delay in its assessment and registration is due to the complexity and standard of the applications it received, and restrictions on its ability to visit firms as planned due to the COVID-19 pandemic.

Firms that failed to apply by 15 December 2020 are ineligible for the temporary registration regime. They must return cryptoassets to customers and stop trading by 10 January 2021. If they fail to cease trading by that date, they risk being subject to the FCA's criminal and civil enforcement powers. The FCA advises customers of these firms to withdraw their cryptoassets or money before 10 January 2021, and provides a link to a list of firms that hold a temporary registration.

UK MiFIR transparency regime: FCA update for end of transition period

The FCA has updated the webpage on its supervisory statement on the operation of the transparency regime under the retained EU law version of the Markets in Financial Instruments Regulation (UK MiFIR) at the end of the transition period, and published a new version of the supervisory statement.

The FCA explains that the statement is part of its necessary preparations for the possibility that at the end of the transition period there is no free trade agreement (FTA) between the UK and EU and no mutual equivalence decisions in areas relevant to the MiFID markets regime. Accordingly, the statement may be subject to change in the event an FTA is reached and mutual equivalence decisions are taken. The FCA may also revise its approach as market conditions develop.

The areas covered by the statement include:

• the FCA's financial instruments reference database (FIRDS), the FCA's financial instruments transparency reference system (FITRS), the investment firms register, the trading venues register, and the systematic internalisers register;
• the concept of "traded on a trading venue" (TToV);
• the double volume cap (DVC);
• transparency waivers and deferrals;
• equity transparency, bond transparency, derivatives and other non-equity instruments transparency; and
• trade reporting, tick sizes and commodity position limits.

MiFIR: Implementing Decision amending earlier Decision recognising certain Singapore derivatives trading venues

Commission Implementing Decision (EU) 2020/2127 amending Commission Implementing Decision (EU) 2019/541 on the equivalence of the legal and supervisory framework applicable to approved exchanges and recognised market operators in Singapore under the EU Markets in Financial Instruments Regulation (MiFIR) has been published in the Official Journal of the EU (OJ).

Implementing Decision (EU) 2019/541 relates to Article 28(1) of MiFIR. It recognises the approved exchanges and recognised market operators that are authorised by the Monetary Authority of Singapore (MAS) as eligible for compliance with the EU trading obligation for derivatives. Implementing Decision (EU) 2020/2127 amends Implementing Decision 2019/541 to include additional approved exchanges and recognised market operators that have been established in Singapore and authorised by MAS after the original Implementing Decision was adopted.

Implementing Decision (EU) 2020/2127 will come into force on 20 December 2020.

MiFID: European Commission adopts Delegated Regulation on thresholds for weekly position reporting

The European Commission has adopted a Delegated Regulation amending Delegated Regulation (EU) 2017/565 as regards the thresholds for weekly position reporting under the Markets in Financial instruments Directive (MiFID).

The next step will be for the Council of the EU and the European Parliament to consider the Delegated Regulation. The Delegated Regulation will enter into force on the third day following its publication in the OJ.

Draft Regulation on recovery and resolution of CCPs: Council of the EU publishes text

The Council of the EU has published the text of the proposed Regulation on the recovery and resolution of central counterparties (CCPs). The European Parliament adopted the Regulation at second reading on 14 December 2020 in accordance with the Council of the EU's first reading position.

The Regulation will enter into force twenty days after its publication in the OJ.

CSDR: ESMA to recognise Euroclear UK & Ireland Limited as a third country CSD

ESMA has announced that Euroclear UK & Ireland Limited, the central securities depository (CSD) established in the UK, will be recognised as a third-country CSD for a limited period, until  30 June 2021, after the end of the Brexit transition period. The announcement follows publication of European Commission Implementing Decision (EU) 2020/1766 on the temporary equivalence of the UK's regulatory framework for CSDs under the Central Securities Depositories Regulation (CSDR).

ESMA scheduled IT maintenance on databases and systems at end of Brexit transition period

ESMA has published a reminder of the operations planned on its databases and systems during a planned maintenance window starting on 31 December 2020 at 21:30 CET until 7 January 2021 at 12:00 CET (noon) at the end of the Brexit transition period.

ESMA reminds users that it will continue receiving files but will not produce feedback files during the maintenance window for its FIRDS, FITRS and DVC. During the maintenance window, reporting entities should continue sending data to their national competent authorities and to ESMA. The backlog of files submitted to ESMA will be processed after completion of the operations.

If ESMA completes the operations earlier than 7 January 2021, it may reopen the system earlier to minimise the downtime. Therefore, market participants should monitor, from 5 January 2021, potential communication in this respect on ESMA's website and publication of FIRDS data by ESMA.

ESMA will also carry out manual updates of databases and registers published directly on the ESMA website (for example, the registers relating to benchmarks, credit rating agencies and money market funds). It has published a new webpage and the status of the individual files will be indicated in the update column on this webpage.

CRAs: ESMA 2020 report on market share calculation

ESMA has published a report setting out its annual market share calculation for EU credit rating agencies (CRAs), as required by Article 8d of the CRA Regulation. The aim of the report is to provide a guide on the requirements of Article 8d of the CRA Regulation, which states that issuers or related third parties are required to consider appointing a CRA with no more than 10% total market share whenever they intend to appoint one or more CRAs to rate an issuance or entity.

ESMA welcomes feedback on the information in the report.

MMF Regulation: ESMA updates guidelines on stress tests

ESMA has published a final report on guidelines on stress test scenarios produced under Article 28 of the Regulation on money market funds (MMF Regulation).

The Annex to the report contains the text of the updated guidelines and the calibration of scenarios for 2020. ESMA notes that applying 2019 scenarios in the current market environment generally leads to absolute levels of stress (with some scenarios being exceeded because of extreme market movements). This is because the COVID-19 pandemic has increased risks for MMFs and the money market instruments in which they invest, and has led to significant liquidity and redemption issues. The risk parameters have therefore been modified to reflect market developments. ESMA, in calibrating the new risk parameters, has worked with the European Systemic Risk Board and the European Central Bank.

MMFs and their managers are expected to measure the impact of the common reference stress scenarios specified in the guidelines. On the basis of the measurements, the reporting template referred to in Article 37 of the MMF Regulation should be completed and sent with quarterly reports to the relevant national competent authority. The new 2020 parameters will have to be used for the purpose of the first reporting period following the start of the application of the updated guidelines.

The guidelines will now be translated. They will become applicable two months after the publication of the translations. The guidelines need to be updated at least every year to take into account the latest market developments.

FICC Market Standards Board draft standards

The Fixed Income, Currencies and Commodities (FICC) Markets Standards Board (FMSB) has published for consultation a draft standard. for sharing investor allocation information in the fixed income primary markets. The standard aims to promote consistent baseline industry practices and provide issuers and investors with control on how their allocation information is used.

In a related development, the FMSB published for consultation a draft standard relating to the execution of large trades in the wholesale FICC markets. It sets out expected behaviours for participants in the secondary FICC markets in relation to large trades across asset classes, in particular with the aim of reducing information asymmetries, clarifying the principles governing pre-hedging, establishing expectations relating to client confidentiality and ensuring transparency of communication between clients and traders.

FMSB members and other interested parties are invited to comment on the proposed standards by 16 March 2021.

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Authored by Yvonne Clapham