- Clarifies position of DEA clients accessing EU trading through sub-delegated DEA.
- That firms need to be authorized as investment firm under MiFID to provide DEA.
- And that mandatory tick size regime applies to both orders and quotes in
On 10 November, FCA issued rules in handbook notice 49 on MiFID, CRD IV.
- Follows December 2015, FCA new rules on secondary trading per MiFID II.
- And July 2015, FCA new second rule-set on implementation of MiFID II.
- Handbook notice makes rule changes to MiFID II Guide and IFPRU 2.2. for CRD IV.
MiFID II Guide
- MiFID II Guide Instrument 2017 (FCA 2017/63) adds new definition to Handbook.
- The guide is to sit on FCA Handbook website but will not form part of handbook.
- Instrument comes into force 3 January 2018, in line with remaining MiFID provisions.
- Instrument makes changes to Handbook to ensure implementation of Art 83 CRD.
- It comes into force on 10 November. Feedback to consultation is in Chap 3 of the notice.
- The new question cover topics of post-sale reporting, record keeping and inducements.
- Clarifies that securities financing transactions are in scope of Art 16(6) record keeping.
- And that Art 62(1) Del Reg 2017/565 report applies to retail and professional clients.
On 8 November, UK FCA issued market watch on conduct, trade reporting.
- FCA issued market watch 54 newsletter on market conduct and trade reporting issues.
- Covers LEIs, ESMA instrument reference data, FCA transitional arrangements, trading
venue operator, MiFID II and market data obligations, authorizations and permissions.
Legal Entity Identifier (LEI)
- Firms with transaction reporting obligation must establish an LEI and keep it updated.
- Include investment firms authorized under MiFID, and credit institution under CRD IV.
- Also for operators of a trading venue, or UK branch of a third country investment firm.
- Such firms are also required to include eligible clients’ LEIs in their transaction reports.
- Clients who are legal entities or structure including companies, charities or trust must
obtain LEI code, if they want their executing firm to continue to act from 3 January 2018.
- FCA has produced leaflet which executing firms can use in communication with clients.
ESMA Instrument Reference Data
- ESMA has issued detail of reference data files, together with instructions downloading.
- Identified the financial instruments in scope for MAR, but noted ESMA statement that
it could not take responsibility for information being complete, accurate, or up to date.
FCA Transitional Arrangements
- On 12 January 2018, FCA is decommissioning MiFID I transaction reporting system (ZEN).
- Will use new FCA Market Data Processor (MDP) IT system to meet the new transaction
reporting requirements for MiFIR, which are due to come into effect from 3 January 2018.
- Set out approach to MiFID I transaction reporting obligation after the cut-over to MiFIR.
Trading Venue Operators
- Venue operators should not report the transaction of a UK branch of third country firm.
- As FCA to receive transaction report from these firms as if they were MiFID investment
firms trading venue operators should not report transactions on behalf of such persons.
- Will avoid FCA receiving duplicate report, which gives misleading impression of activity.
Market Data Obligations
- FCA has developed a new Market Data Reporting (MDP) system to enable management
of large changes in volumes, range of market data types, which entities need to submit.
- To meet new market data reporting obligations under MiFID II, MiFIR from 3 January 2018.
- Have now made MDP Industry Test Environment, ITE, available for entities who wish to
demonstrate they conform with technical specification and on-board to the MDP system.
Authorisations, Permissions for MiFID II
- Firms needing new permission who have not submitted an application must take action.
- Can only carry out MiFID II activity for which they have required regulatory permission.
- Firms may need to plan for the required permissions not being in place by 3 January 2018.
- If application already submitted FCA have subsequently informed that it is not complete
must provide the missing information as soon as possible, or cannot assess applications.
On 10 January, HK SFC issued user guide for reporting short positions.
- Covered updates to user guide on short position reporting, under expanded scope.
- Included short position reporting process, accessing SPR services, and registration.
- Included registration acknowledgement, registration activation, completing forms.
- As well as system breakdown, browser specification, security tips and contact info.
- On reportable short positions, and those which are required to be notified to SFC.
- SFC designation of online communication system, publish reported short positions.
- Daily reporting requirements, reporting notice, specified shares and specified ATS.
- From 15 March 2017, reporting required for short positions in designated securities.
- Eligible for short selling specified by Stock Exchange of Hong Kong Limited (SEHK).
- List of designated securities eligible for short selling is published on SEHK website.
- From 15March 2017, SFC will cease publishing list of specified shares on its website.
On 2 November, AMF proposed rules for final implementation of MiFID II.
- he proposals amend procedures for the approval of investment service providers.
- Amendments concern Book III and Book V of AMF’s General Regulation (RGAMF).
- Rules relate to authorization procedure for management, MTFs and position limits.
- But also introduce provisions for the managers of organized trading facilities, data.
- AMF is also proposing deleting sections which have now been superseded by MiFIR.
- Investment advisers to be subject to equivalent conduct rules as investment firms.
- Comments are due before 1 December 2017.
On 2 November, MFSA issued circular on transaction reporting for MiFID II.
- On 26 October, MFSA seminar on MiFID II provided overview of legislative requirements.
- During seminar industry raised queries relating to transaction reporting requirement.
- Circular provides further analysis on some queries which were raised during seminar.
- Guidance on content, timeline, collective investment schemes, legal entity identifiers.
- MFSA will replicate TRS fields in Transaction Reporting Exchange Mechanism (TREM).
- Three-phased approach to adopt TREM: on registration; connectivity test; validation.
- Phase 1 – Registration, all entities which will submit, to file form to get TREM access.
- Phase 2 – entities registered for TREM, able to test connectivity with MFSA mid-Nov.
- Phase 3 – MFSA will be ready to receive reports for validation testing mid-December.
- Submit compressed files, of XML file on MIFIR XSD schema will be parsed, validated.
Funds and LEI
- MiFIR does not apply to managers of Collective Investment Schemes, as per details.
- Cited MFSA 9 August 2016, circular reminding of need for legal entity identifier (LEI’).
- MiFID II enters into force on 3 January 2018.
On 4 November, ASX issued final listing rule on reverse takeover issues.
- Final rule regulates reverse takeovers, and voting exclusions in listing rule 14.11.
- Minor amendment to rules 1.2 and 1.3 on accounts to provide ASX at application.
No Shareholder Approval
- Current listing rule 7.1 requires a listed entity to obtain security holder approval,
for issues of securities over 15% of fully paid ordinary capital in 12 month period.
- Exception did not cover issues for a takeover bid to comply with Corporations Act.
or a merger scheme by way of scheme of arrangement under part 5.1 of that Act.
- Also excluded issues to fund the cash consideration payable under a takeover bid
or a merger, if the terms of the issue are disclosed in the bid/scheme documents.
- Thus, shareholder approval is not currently required for bidder to issue securities,
under a takeover bid or merger scheme, regardless of number of securities issued.
Changes for Reverse Takeover
- Above exceptions no longer apply to issues under, or to fund, a reverse takeover.
- Thus issues for reverse takeover, will now require approval under listing rule 7.1.
- Reverse takeover is where entity is proposing to acquire securities of other body,
and aggregate number of equities or to be issued by entity exceeded threshold.
- If issue equal to, or above, number of fully paid securities at announcement date.
- Aggregate separate issues if ASX believe are part of same commercial transaction.
On 27 October, AMF released statement on rules introduced by executive order 2017-1432.
- Notes overhaul of securitization vehicles and the creation of specialized financing vehicles.
- Changes exemption from banking monopoly rules to transfer claims to non-French entities.
- Makes it possible to supplement liquidity risk management tools, creation of FCPE funds.
- Rules changes terms and conditions for investment funds to provide loans to companies.
- Put specialized funding agencies (organismes de financement spécialisé), under AIFMD.
- Clarified rules applicable to depositories of securitization and highlights role of manager.
- Rewrites Monetary Code, Ch. IV, on financing, securitization bodies, specialized finance.
- Purpose to put specialized funding agencies under AIFMD but also rules for securitization.
- Clarified responsibilities of managers of depositories used in conjunction with transaction.
- Funds are able to acquire unmatured receivables from credit institutions per foreign law.
- Questions cover definition of APMs, scope of guidelines, scope exemption, organic growth.
- And how to carry out reconciliation and how to apply fair review principle in APM context.
Background and Scope
- Aims to encourage issuers to publish transparent, unbiased and comparable information.
- With financial results that give user comprehensive understanding of their performance.
- APM include EBIT (earnings before interest & tax), free cash flow, and underlying profit.
- Also EBITDA (earnings before interest, taxes, depreciation & amortization) and net-debt.
- Include APM in regulated information, labeling, calculation, presentation, comparability.
- Regulated documents include issuer prospectuses, financial reports, market disclosures.
- APMs are defined as measure of historical or future financial performance, or cash flow.
- Excluded other measure if already defined, or specified in financial reporting framework.
- If securities traded on regulated market, publish information for transparency directive.
- Issuers or persons responsible for a prospectus should define APMs used and components.
- Basis of calculation used, including the details of any material hypotheses or assumption.
- Disclose reconciliations of the APMs, to the most directly reconcilable line item, subtotal.
- Apply to issuers with securities traded on regulated markets, and drawing up prospectus.
- Supervised by authorities of transparency/prospectus directive, market abuse regulation.
- Aligns with parallel guidance issued by securities regulators in the US, Australia, Canada.