Demystifying EMIR & CSDR s Implementation. Mr Nathan Fenech Analyst, Securities and Markets Supervision Unit, MFSA 16 th December, 2015

Transcription

1 Demystifying EMIR & CSDR s Implementation Mr Nathan Fenech Analyst, Securities and Markets Supervision Unit, MFSA 16 th December,

2 1 2 EMIR EMIR CSDR 2

3 3

4 Implementation in Malta 3 Stage Process: STAGE 1 INFORMATION AND GUIDANCE Circulars Guidance Notes Information Sessions & Queries STAGE 2 COMPILATION OF DATA Financial Counterparties Non-Financial Counterparties STAGE 3 MONITORING OF COMPLIANCE 4

5 Implementation in Malta STAGE 1 INFORMATION AND GUIDANCE Circulars Guidance Notes Information Sessions & Queries STAGE 2 COMPILATION OF DATA Financial Counterparties Non-Financial Counterparties STAGE 3 MONITORING OF COMPLIANCE 5

6 Stage 1 Information and Guidance Circulars 1) Notification about EMIR s commencement 2) Draft Legal Notice and Draft guidance notes to CCPs 3) Adoption of a number of technical standards 4) Publication of Legal Notice, EMIR implementation timings, dedicated section on website, CCP assessment 5) Publication of ESMA Q&A and Notification for NFCs+ 6) EMIR guidance for Financial and Non-Financial Counterparties 7) Note on LEIs 6

7 Stage 1 Information and Guidance Circulars (ii) 8) Approval of TRs and further publication of technical standards 9) Draft technical standard on contracts direct, substantial and foreseeable effect within the Union and non-evasion of rules and obligations 10) On-site inspections notification 11) Authorisation and Supervision of CCPs 12) Updates on the obligations to report to Trade Repositories and the requirement to clear through CCPs 7

8 Stage 1 Information and Guidance Guidance Notes Draft guidance notes related to CCPs Self assessment for CCPs Circular (01/07/2013) guidance to Financial Counterparties and Non-Financial Counterparties Guidance notes related to Financial Counterparties and Non-Financial Counterparties MFSA EMIR Q&A 8

9 Stage 1 Information and Guidance Information Sessions EMIR Industry Information Meeting 3 rd September 2013 EMIR Educational Clinic 20 th February 2014 Educational Clinic on EMIR & CSDR 16 th December 2015 Queries A considerable number of queries were received, a large number of which have been answered Some queries awaiting further guidance or clarifications from ESMA 9

10 Implementation in Malta STAGE 1 INFORMATION AND GUIDANCE Circulars Guidance Notes Information Sessions & Queries STAGE 2 COMPILATION OF DATA Financial Counterparties Non-Financial Counterparties STAGE 3 MONITORING OF COMPLIANCE 10

11 Stage 2 Compilation of Data Financial Counterparties Sent out individual letters to a large number of licence holders: Fund Managers Investment Services Licence Holders Professional Investor Funds UCITS Insurance Companies Financial Institutions Credit Institutions 11

12 Stage 2 Compilation of Data Falling within scope 500 Financial Counterparties 200 Non-Financial Counterparties 2 NFCs+ 12

13 Implementation in Malta STAGE 1 INFORMATION AND GUIDANCE Circulars Guidance Notes Information Sessions & Queries STAGE 2 COMPILATION OF DATA Financial Counterparties Non-Financial Counterparties STAGE 3 MONITORING OF COMPLIANCE 13

14 Stage 3 Monitoring of Compliance In January 2014 the MFSA commenced with a number of onsite inspections with regards to EMIR Scope of inspections: Better understanding of the nature of the entity/undertaking s activities Review of the relevant controls and procedures Guidance to the Company to meet the necessary requirements under EMIR 14

15 Stage 3 Monitoring of Compliance On-Site Inspections Outcome? Required Guidance Satisfactory Partially Implemented 15

16 Stage 3 Monitoring of Compliance Trade Reporting MFSA links with all Trade Repositories 16

17 Stage 3 Monitoring of Compliance Non-Financial Counterparties Exceeding the Clearing Threshold (NFC+s) 17

18 Stage 3 Monitoring of Compliance What is the MFSA expecting? REPORTING OBLIGATION Legal Entity Identifier ( LEI ) Trade Repository / Delegation of Reporting Record Keeping (5 Years) RISK MITIGATION TECHNIQUES Agreements with Counterparties (e.g Master Agreements) Portfolio Compression Timely Confirmations Dispute Resolutions Portfolio Reconciliations Possible use of external agreements (e.g. ISDA Agreement Extension - EMIR Portfolio Reconciliation, Dispute Resolution And Disclosure) 18

19 Stage 3 Monitoring of Compliance What is the MFSA expecting? CLEARING OBLIGATION Necessary Setups With Clearing Members / CCPs Classification of Counterparty (Clearing Categories 1 to 4) Clearing Threshold Calculation (for NFCs) 19

20 1 2 CSDR EMIR CSDR 20

21 Current Legal Framework Central Securities Depositories ( CSDs ) in Malta are regulated under Part IV of the Financial Markets Act, Chapter 345 of the Laws of Malta, (the FMA or the Act ) Part IV of the FMA is also complimented by the following subsidiary legislations: Legal notice 360 of 2008 Regulated Markets and Central Securities Depository (Fees) Regulations (S.L ) Legal notice 138 of 2009 Central Securities Depository (Authorisation Requirements) Regulations (S.L ) Legal notice 139 of 2009 Central Securities Depository (Control of Assets) Regulations (S.L ) 21

22 New Framework 15 April Regulation (EU) N o 909/2014 on improving securities settlement in the European Union and on Central Securities Depositories and amending directives 98/26/EC and 2014/65/EU and Regulation (EU) N o 236/2012 was adopted by the European Parliament, and subsequently adopted by the Council of the European Union on 23 July 2014 EMIR + MiFID + CSDR = Framework in which systemically important securities infrastructures (trading venues, central counterparties, trade repositories and central securities depositories) are subject to common rules on a European level 22

23 Regulation vs Directive Regulations have binding legal force throughout every Member State and enter into force on a set date in all the Member States Directives lay down certain results that must be achieved but each Member State is free to decide how to transpose directives into national laws 23

24 Changes Financial Markets Act LN 360 of 2008 RMs and CSD (Fees) Regulations LN 138 of 2009 CSD Authorisation Requirements Regulations LN 139 of 2009 CSD (Control of Assets) Regulations Financial Market Rules Companies Act 24

25 Changes 25

26 26

27 Changes Dematerialisation & Immobilisation Dematerialisation and Immobilisation of Securities Transferable securities admitted to trading or traded on a trading venue should be represented in book entry form as immobilisation or subsequent to a direct issuance in dematerialised form FMA Change: Uncertificated Form Represented in Book-Entry Form as Immobilisation 27

28 Changes Settlement T+2 Settlement Periods Pre-CSDR the vast majority of European markets, including Malta, had a settlement period for securities which was T+3 Post-CSDR - Article 5 of the CSDR requires all transactions in transferable securities executed on trading venues to be settled on T+2. Effective 1 January

29 Changes Settlement Internalisers Settlement Internalisers SSS Counterparty A 100 Shares 2 per share Settlement Internaliser 100 Shares 2 per share Counterparty B Settlement Internalisers to report to their Competent Authorities on a quarterly basis the aggregated volume and value of all securities transactions which they settle outside of CSDs Guidelines to be issued by ESMA 29

30 Changes Settlement Discipline Settlement Discipline Intended Settlement Date T+2 Trading Venues Procedures that enable the confirmation of relevant details of transactions in financial instruments on the date when the transaction has been executed Investment Firms take measures to limit settlement fails CSD Procedures to facilitate settlement on the intended settlement date and encourage timely settlement 30

31 Changes Settlement Discipline (Cont ) Settlement Discipline (Cont ) CSD shall report settlement fails to ESMA and MFSA. Settlement fails will also be made public. CSD shall also establish procedures to facilitate settlement, which will include a penalty mechanism to deter settlement fails Daily cash penalty after settlement before buy-in initiation Buy-In process after 4 th business day of failing transaction 31

32 Changes Buy-Ins Scenario 1: Original Transaction Counterparty A 100 Shares 2 per share Counterparty B Scenario 2: Buy-In Counterparty A 0.10 per share Counterparty B 100 Shares Buy-In Agent 2.10 per share 100 Shares 2.10 per share Market 32

33 Changes - Passporting Provision of Services in another Member State CSDs authorised and established within the EU are allowed to provide services within the Union Notification systems similar to those allowed for in MiFID shall be applied Third-Country CSDs require recognition from ESMA 33

34 Malta CSD providing services in Malta EU/EEA CSD providing services in Malta Third-Country CSD providing services in Malta Malta Malta CSD providing services outside of Malta to EU / EEA Third-Country CSD providing services in Third- Countries 34

35 Changes CSD Requirements CSD Requirements Organisational Requirements Capital Requirements Provision of banking-type ancillary services 35

36 Mr Nathan Fenech Analyst, MFSA Queries: