ESMA issued an opinion providing further guidance on the treatment of packages under the trading obligation for derivatives, which the Markets in Financial Instruments Regulation (MiFIR) introduced on January 03, 2018. ESMA notes that the trading obligation is designed to apply at the level of a financial instrument and not at the level of the package. Therefore, only components of a package are subject to the trading obligation, but not the package.
Under MiFID II, trading obligation for derivatives does not provide for a tailored regime for packages, which is likely to result in the divergent application of the trading obligation for derivatives in the EU. To ensure a consistent application of the trading obligation across EU, ESMA issued this opinion, which clarifies, through a positive list, the categories of packages for which the derivative components subject to the trading obligation are always required to be traded on a trading venue. Package orders/transactions are composed of two or more financial instruments that are priced as a single unit, simultaneously executed, and where the execution of each component is contingent on the execution of all other components. Packages are a relevant part of the financial markets by enabling investment firms and their clients to conduct trades for risk management and hedging purposes.
Keywords: Europe, EU, Securities, MiFID II, MiFIR, Trading Obligation, OTC Derivatives, ESMA
Previous ArticleHKMA Revises Returns on Capital Adequacy and Leverage Ratios
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.