Chapter 5 of CP18/36 covers many of the BTS that were not addressed in the FCA’s first Brexit consultation paper, but not all of them. However, the BTS that are covered relate to a number of important pieces of EU financial services legislation including MiFID II, MiFIR, PRIIPs Regulation, Market Abuse Regulation, EMIR and the Benchmarks Regulation.
Most of the changes that the FCA is proposing to make to the BTS are designed to fix gaps that are cross-cutting in nature and follow the framework that HM Treasury has created through its statutory instruments.
In terms of MiFID II BTS, the FCA makes a number of points including
- The Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 (MiFID II Exit Instrument) grant a set of temporary powers that provide the FCA with some flexibility as to how the MiFID II transparency regime is operated during a transitional period of up to four years from exit day, with a view to maintaining existing outcomes as far as possible. The FCA states that it will issue a statement of policy on how the temporary powers will be used.
- The MiFID II transparency regime has several BTS associated with it. The key changes that the FCA proposes to make to these BTS are intended to give effect to the onshoring principles in the MiFID II Exit Instrument. This includes inserting the concept of the “relevant area” (consisting of the UK and other countries or regions the FCA specifies) into specific calculations and continuing to publish transparency information under Commission Delegated Regulations 2017/587, 2017/583 and 2017/588.
For the PRIIPs Regulation BTS the FCA proposes to amend Regulatory Technical Standard (RTS) 2017/653 so that EEA entities are not treated as third-country entities under certain RTS provisions related to risk indicators. One of the reasons for this proposal is to ensure that the FCA maintains operable equivalence with the methodologies in the RTS and avoid risk ratings set out in key information documents for certain PRIIPs increasing on exit day.
In relation to EMIR, the FCA is consulting on proposed changes to BTSs concerning the data publication and data access requirements for trade repositories, general “level 2” requirements concerning clearing, access by central counterparties to trading venue market data and risk mitigation techniques and the content, format and frequency of reports to be made to a trade repository. The relevant BTSs are Commission Delegated Regulations 149/2013, 148/2013, 1247/2012 and 151/2013.
Specific points that the FCA make include
- In onshoring Commission Delegated Regulation 151/2013, it is proposed that the technical arrangements necessary for trade repositories to provide access to trade data be amended, in accordance with Article 81 of EMIR. The FCA states that this is a consequence of it replacing the European Securities and Markets Authority’s (ESMA) TRACE system with its own Derivatives Data Store system.
- In onshoring Commission Delegated Regulation 1247/2012, removing the sentences referring to Article 9(3) of EMIR in relation to reporting to ESMA until a trade repository is registered for a particular derivatives class. Also, references to “ESMA” will be replaced with references to the ‘FCA’ in connection with the endorsement of the code referred to in Article 4(9) and the unique trade identifier referred to in Article 4a(1).