Europe: EU/UK Regulatory Roundup

• Commission Delegated Regulation (EU) 2018/64 of 29 September 2017 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to specifying how the criteria of Article 20(1)(c)(iii) are to be applied for assessing whether certain events would result in significant and adverse impacts on market integrity, financial stability, consumers, the real economy or the financing of households and businesses in one or more Member States;
• Commission Delegated Regulation (EU) 2018/65 of 29 September 2017 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council specifying technical elements of the definitions laid down in paragraph 1 of Article 3 of the Regulation;
• Commission Delegated Regulation (EU) 2018/66 of 29 September 2017 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council specifying how the nominal amount of financial instruments other than derivatives, the notional amount of derivatives and the net asset value of investment funds are to be assessed; and
• Commission Delegated Regulation (EU) 2018/67 of 3 October 2017 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to the establishment of the conditions to assess the impact resulting from the cessation of or change to existing benchmarks.

The International Swaps and Derivatives Association (ISDA) updates its publicly available FAQs on Brexit which covers the following key areas:

• contractual points under ISDA documentation;
• choice of law, jurisdiction and recognition of judgements;
• insolvency;
• access to EU financial markets;
• European Market Infrastructure Regulation (EMIR);
• collateral;
• Settlement Finality Directive;
• Bank Recovery and Resolution Directive; and
• amendments to the ISDA Master Agreement and transfers of existing contracts.

The FCA publishes an updated version of its Q&A document on reporting transparency information to the FCA. The document provides information to alternative investment fund managers about:

• who is required to report transparency information;
• what transparency information must be reported;
• how the FCA will collect transparency information; and
• how to register and how to use Gabriel to report transparency information.

Commission adopts legislative proposals for revised EU prudential framework for investment firms

• Class 1 investment firms are those with total assets above €30bn and which provide underwriting services and dealing on own account. These investment firms would remain under the CRD IV/ CRR;
• Class 2 investment firms would be those above any of the following size thresholds: (i) assets under management under both discretionary portfolio management and non-discretionary arrangements higher than €1.2 billion; (ii) client orders handled of at least €100 million / day for cash trades and/or at least €1 billion / day for derivatives; (iii) balance sheet total higher than €100 million; (iv) total gross revenues higher than €30 million; (iv) exposure to risks from trading financial instruments higher than zero; (v) client assets safeguarded and administered higher than zero; and (vi) client money held higher than zero; and
• Class 3 investment firms would be those below all of the above thresholds.

• the FCA’s future approach to consumers. The document explores the FCA’s approach to regulating for retail consumers;
• the FCA’s approach to competition. The FCA looks at how it delivers its competition objective; and
• the FCA’s approach to authorisation. The FCA explains the purpose of, and its approach to authorisation, the public value it delivers and the changes it is making to improve its approach.

• according to the data of the survey, equity long/short was the most widely used investment strategy, followed by global macro and fixed income arbitrage; and
• as of the measurement date, 3.8% of hedge fund assets had constrained redemptions through the use of liquidity management tools, such as gates, suspensions or side pockets.

ESMA publishes an updated version of its Q&As on the Market Abuse Regulation (MAR). ESMA added answers on the following questions:

• how should permission to trade in a closed period, which may be granted in certain circumstances to persons discharging managerial responsibilities (PDMR) in accordance with Article 19(12) of the MAR, be considered in the context of Article 14 of MAR?

• are the types of “transaction” by a PDMR prohibited during a closed period under Article 19(11) of MAR the same as those types of transaction subject to the notification requirements set out under Article 19(1) of MAR?

Official Journal: Regulation amending EuVECA Regulation and EuSEF Regulation

FCA Market Watch issue 54

FCA publishes Future Approach to Consumers

FSB considers financial stability implications of artificial intelligence and machine learning

The Commission issues FAQs in order to clarify how EU investment firms should interact when they seek out brokerage and research services from broker-dealers in non-EU countries.