The European Securities and Markets Authority (ESMA), the EU’s direct supervisor of credit rating agencies (CRAs), has registered today DBRS Ratings GmbH (DBRS RG) as a CRA under the CRA Regulation. The registration takes effect from 14 December 2018.

DBRS RG is based in Germany and intends to issue:

  • sovereign and public finance ratings;
  • structured finance ratings; and
  • corporate ratings of financials and non-financials

DBRS RG belongs to a group of CRAs and intends to endorse ratings issued by third-country CRAs of the group, based in the United States and Canada. Those CRAs are registered by and are subject to the supervision of the respective local competent authorities.

The CRA Regulation

The CRA Regulation seeks to ensure that credit ratings issued in the EU respect minimum standards of quality, transparency and independence by providing that only companies registered by ESMA as CRAs may lawfully issue credit ratings which can be used for regulatory purposes by credit institutions, investment firms, insurance and reinsurance undertakings, institutions for occupational retirement provision, management companies, investment companies, alternative investment fund managers and central counterparties.

In order to be registered as a CRA, a company must be able to demonstrate to ESMA that it can comply with the requirements of the CRA Regulation, including, most importantly, on:

  • the governance of CRAs and the management of conflicts of interest;
  • the development and application of methodologies for assessing credit risk; and
  • the disclosure of information to ESMA and to market participants.

Once registered, CRAs are subject to on-going supervision and monitoring by ESMA to ensure that they continue to meet the conditions for registration. ESMA will impose sanctions and/or penalties where it finds that a CRA has failed to meet its obligations under the CRA Regulation. The total number of CRAs registered in the EU is 27 CRAs. Amongst the 27 registered CRAs, four operate under a group structure, totalling 19 legal entities in the EU, which means that the total number of CRA entities registered in the EU is 42.

The European Securities and Markets Authority (ESMA) has today published its Final Report amending the tick size regime (Commission Delegated Regulation (EU) 2017/588 (RTS 11)). The proposed draft amendments to RTS 11 will allow National Competent Authorities (NCAs) of European Union (EU) trading venues, where third-country shares are traded, to decide on an adjusted average daily number of transactions (ADNT) on a case-by-case basis in order to take into account the liquidity available on third country venues in the calibration of tick sizes.

The minimum tick size, under RTS 11, applicable to shares and depositary receipts is calibrated to the ADNT on the most liquid market in the EU. While this metric appears to be an adequate liquidity indicator for the vast majority of equity instruments, experience since MiFID II’s implementation shows that it may not be suited to instruments where the most liquid venue is located outside the EU.

In those cases, the mandatory tick size may be calculated only based on a small subset of the global trading activity and, as a result, EU trading venues may be subject to minimum tick sizes that are larger than those applicable on non-EU venues. This may unintentionally put EU venues at a competitive disadvantage, and may result in shallower liquidity on EU trading venues which could be detrimental to the interests of investors trading on EU venues and for orderly trading on EU markets.

Steven Maijoor, Chair, said:

“Today’s proposal aims to alleviate concerns about an unlevel playing field developing regarding tick sizes between third-country and EU trading venues. It also ensures that the applicable tick size in the EU is calibrated in a more convergent way.

“The proposed amendment is also relevant in the context of the United Kingdom’s withdrawal from the EU, which may result in a significant increase of the number of equity instruments for which the most liquid trading venue is located outside the Union. It will provide EU national competent authorities with adequate tools to address, at least with respect to the tick size regime, the possible issues that might arise in this context.”

Next steps

ESMA has submitted the final report to the European Commission which now has three months to decide whether to endorse the proposed amendments to RTS 11.

The European Securities and Markets Authority (ESMA) has updated today its public register with the latest set of double volume cap (DVC) data under the Markets in Financial Instruments Directive (MiFID II). Today’s updates include DVC data and calculations for the period of 1 November 2017 to 31 October 2018 as well as updates to already published DVC periods. 

The number of new breaches is 54: 45 equities for the 8% cap, applicable to all trading venues, and 9 equities for the 4% cap, that applies to individual trading venues. Trading under the waivers for all new instruments in breach of the DVC thresholds should be suspended from 12 December 2018 to 11 June 2019. The instruments for which caps already existed from previous periods will continue to be suspended.

In addition, ESMA highlights that some trading venues in the meantime have submitted corrected data that affects past DVC publications. For 1 instrument, this means that the previously identified breach of the cap proved to be incorrect and the suspensions of trading under the waivers should be lifted.

As of 7 December, there is a total of 637 instruments suspended. Please be aware that ESMA does not update DVC files older than 6 months. 

ESMA has also updated the DVC completeness indicators file. In order to assess the contribution of a trading venue both completeness indicators should be considered. The completeness ratio indicates the percentage of reports provided divided by the number of reports expected irrespectively from the number of instruments available for trading on that trading venue. In other words, missing one or a few periods on a large number of instruments, or missing the same number of periods in one instrument only does not change the value of this indicator. This indicator is independent from the number of instruments available for trading on the venue. On the other hand, the completeness shortfall takes into account the number of incomplete ISINs for the trading venue. In other words, missing one or a few periods on a large number of instruments, increases the value of this indicator. 

Background

MiFID II introduced the DVC to limit the amount of dark trading in equities allowed under the reference price waiver and the negotiated transaction waiver. The DVC is calculated per instrument (ISIN) based on the rolling average of trading in that instrument over the last 12 months. 

 

ESMA is today launching the process to renew the Consultative Working Group (CWG) of the Financial Innovation Standing Committee (FISC). ESMA is calling for expressions of interest from stakeholders to become a member of the CWG by 15 January 2019. 

ESMA has established the CWG to benefit from the expertise of stakeholders who are involved in the topics related to financial innovation under ESMA’s remit (securities markets, market infrastructures, institutional and retail investors) and with a view to support ESMA’s objectives of investor protection, market integrity and financial stability. FISC looks to this group to provide expert advice regarding ESMA’s work on Financial Innovation.

​Interested stakeholders can apply by 15 January, by submitting the application form and their CV. 

The European Securities and Markets Authority (ESMA) has published the new list of members of its Securities and Markets Stakeholder Group (SMSG) following its approval by its Board of Supervisors. The selected individuals begin a 2½ year term on 1 January 2019 and will replace the group whose mandate expires on 31 December 2018.

The new SMSG will be composed of 30 individuals drawn from across 18 Member States and representing ESMA’s key stakeholder constituencies – financial market participants (10), employee representatives (1), consumer representatives (8), users of financial services (3), small and medium sized enterprises (2) and academics (6). The new SMSG will feature 15 new members, nine are beginning a second term, and six joined the previous group at later dates and are still in their current term.

The SMSG is established according to ESMA’s founding regulation and facilitates consultation between ESMA and its key financial market stakeholders on its work. The SMSG provides ESMA with opinions and advice on its policy work and must be consulted on technical standards, guidelines and recommendations. Additionally, it can inform ESMA of any inconsistent application of European Union law as well as inconsistent supervisory practices in Member States.

Steven Maijoor, ESMA Chair, said:

“The SMSG plays an important role in ESMA’s policymaking discussions, providing us with valuable input on the potential impact our policy and regulatory activities may have on the EU’s financial markets and their users.

“The broad geographical representation in this SMSG will help ensure that the voices from all markets across Europe are heard, and I believe that this will contribute positively to ESMA’s focus on supervisory convergence.

“I would like to thank the outgoing members of the SMSG and look forward to working with their successors.”

The SMSG meets at least four times a year, and also meets twice a year with ESMA’s Board of Supervisors. Their advice and opinions are published on ESMA’s website.

List of Member of Securities and Markets Stakeholder Group

The successful candidates were selected from a field of 162 eligible applicants. The following individuals will make up the SMSG for 2½ years commencing on 1 January 2019:

Financial Market Participants

·         Adina Gurau Audibert (FR/RO) Head of Asset Management, Association Française de la Gestion financière (AFG);

·         Alexander Schindler (DE) Member of the Executive Board, Union Asset Management Holding AG;

·         Eric Litvack (DE) Head of Regulatory Strategy, Société Générale;

·         Ignacio Santillán (ES) CEO, Spanish Investors Compensation Scheme for investment firms (FOGAIN);

·         Jean-Marc Servat (FR) Chair, European Association of Corporate Treasurers (EACT);

·         Kerstin Hermansson (SE) CEO, Swedish Securities Dealers Association (SSDA);

·         Martin Scheck (UK), CEO, International Capital Market Association (ICMA);

·         Nathalie Gay Guggenheim (FR), Head of Regulatory Transformation, Global Banking and Markets, HSBC;

·         Rainer Riess (DE), Director General, Federation of European Securities Exchanges (FESE).

Employee Representatives

·         Jan Kust (CZ), Member of the Board, Trade Union of Banking and Insurance Employees in the Czech Republic.

Consumers Representatives

·         Guillaume Prache (FR/BE), Managing Director, Better Finance;

·         Jasper De Meyer (BE), Financial Services Officer, European Consumer Organisation (BEUC);

·         Martha Oberndorfer (AT), Member of the Advisory Council, Austrian Shareholder Association;

·         Octávio Viana (PT), President of the Board of Directors, Associação de Investidores e Analistas Técnicos Mercado de Capitais (ATM);

·         Paul Koster (NL), Managing Director, Dutch Shareholders Organisation;

·         Troels Hauer Holmberg (DK), Senior Economic Advisor, Danish Consumer Council.

Users of Financial Services

·         Sari Lounasmeri (FI), CEO, Finnish Foundation for Share Promotion.

Small and Medium Enterprises

·         Piotr Biernacki (PL), Vice-President of the Management Board, Polish Association of Listed Companies;

·         Santeri Suominen (FI), Legal Adviser, Confederation of Finnish Industries (EK).

Academics

·         Christos Alexakis (EL), Associate Professor in Finance, ESC - Rennes School of Business;

·         Giovanni Petrella (IT), Full Professor of Banking, Università Cattolica;

·         Michael Nietsch (DE), Professor of Law, EBS Universität für Wirtschaft und Recht;

·         Veerle Colaert (BE), Professor of Financial Law, KU Leuven University;

·         Vincenzo Troiano (IT), Full Professor, University of Perugia.

Members with existing mandates

Six members of the previous SMSG joined the group at dates following its formation and will serve the remainder of their current term, these are:

·         Andreas Gustafsson (SE), SVP & General Counsel Europe, Nasdaq Stockholm (until 30 November 2020) - Financial market participants;

·         Blanaid Clarke (IE), Professor of Banking, Trinity College Dublin (until 31 July 2020) – Academics;

·         Christiane Hölz (DE), Lawyer, Deutsche Schutzvereinigung für Wertpapierbesitz e.V. (DSW) (until 31 December 2019) - Users of financial services;

·         Geoffrey Bezzina (MT), Head of the Arbitrer’s office, Malta (until 31 August 2020) - Consumer representatives;

·         Juan Viver (ES), Independent consultant (until 31 August 2020) - Consumer representatives;

·         Rainer Lenz Chair (DE), Chair of the Board of Directors, Finance Watch (until 31 December 2019) - Users of financial services.

The European Securities and Markets Authority (ESMA) has published its annual market share calculation for EU registered credit rating agencies (CRAs).

The purpose of the market share calculation is to facilitate issuers and related third parties in their evaluation of a CRA with no more than 10% total market share in the EU.

The CRA Regulation (CRAR), under Article 8d, says that issuers or related third parties are required to consider appointing a CRA with no more than 10% total market share whenever they intend to appoint one or more CRAs to rate an issuance or entity.

Using the Market Share Calculation

The publication aims to guide the user through the requirements of Article 8d. It also provides background and guidance as to how the market share calculation is performed and should be used.

The structure and approach of the document is as follows:

  • Section 6 - Allows the user to identify CRAs with no more than 10% total market share;
  • Section 7 - Allows the user to identify the types of credit ratings offered by these CRAs;
  • Section 8 - Allows the user to assess the market presence of CRAs in different asset classes; and
  • Section 9 - Provides a link to a Standard Form and Supervisory Briefing the user can for documenting the non-appointment of a CRA with no more than 10% total market share.

This market share calculation is valid for use from its date of publication and applicable until the date of publication of the next Market Share Calculation in 2019.

ESMA welcomes feedback on the information presented in this market share calculation in future and invites market participants to send this by email to: CRA-info@esma.europa.eu

 

The European Securities and Markets Authority (ESMA), the EU’s direct supervisor of credit rating agencies (CRAs), has registered today A.M. Best (EU) Rating Services B.V. as a CRA under the CRA Regulation. 

The registration takes effect from today 3 December 2018. A.M. Best (EU) Rating Services B.V. is based in the Netherlands and intends to issue corporate ratings for insurance undertakings and corporate issuers that are not considered a financial institution or an insurance undertaking.

The CRA Regulation seeks to ensure that credit ratings issued in the EU meet minimum standards of quality, transparency and independence by providing that only companies registered by ESMA as CRAs may lawfully issue credit ratings which can be used for regulatory purposes by credit institutions, investment firms, insurance and reinsurance undertakings, institutions for occupational retirement provision, management companies, investment companies, alternative investment fund managers and central counterparties. 

In order to be registered as a CRA, a company must be able to demonstrate to ESMA that it complies with the requirements of the CRA Regulation, which covers inter alia:

  • the governance of CRAs and the management of conflicts of interest;
  • the development and application of methodologies for assessing credit risk; and
  • the disclosure of information to ESMA and to market participants. 

Once registered, CRAs are subject to on-going monitoring and supervision by ESMA to ensure that they continue to meet the conditions for registration. ESMA will impose sanctions and/or penalties where it finds that a CRA has failed to meet its obligations under the CRA Regulation. 

The total number of CRAs registered in the EU is 27 CRAs. Amongst the 27 registered CRAs, three operate under a group structure, totalling 17 legal entities in the EU, which means that the total number of CRA entities registered in the EU is 41.

The European Supervisory Authorities (ESAs – European Banking Authority, European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) have published a statement in response to industry concerns relating to severe operational challenges both in meeting the transitional provisions of the Securitisation Regulation disclosure requirements, as well as in complying with the EU requirements on risk retention, transparency, re-securitisation and criteria for credit-granting obligations on a consolidated basis by EU credit institutions engaged in local securitisation activities in third countries.

The European Securities and Markets Authority (ESMA) has issued today the latest iteration of its Risk Dashboardcovering risks in the EU’s securities markets for Q3 2018. ESMA’s overall risk assessment remains unchanged from Q2 2018 at high levels.

Equity markets increased slightly over the course of the 3rd quarter 2018, however market nervousness and sensitivity are rising, as evidenced by the global equity market sell-off at the beginning of October. The budget plans of Italy have led to sovereign bond market volatility remaining at a high level, and generally high market valuations coupled with market uncertainty contribute to very high market risk.

Going forward, ESMA sees concerns over a potential no-deal Brexit increasingly weighing on economic and market expectations. Risks to business operations from Brexit as well as from cyber threats continue to be a major concern, leading operational risk to remain elevated with a negative outlook

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