The European Securities and Markets Authority (ESMA), is an open and transparent EU Authority, and in order to successfully achieve its mission, ESMA welcomes and encourages stakeholders to make their views and opinions known.

ESMA strives to ensure that the means available for stakeholders to interact with the Authority are appropriate and meet the needs of its various interlocutors.  In that respect, ESMA is today launching a short survey, and welcomes input from all market participants and other stakeholders regarding the way they interact with ESMA. 

A full overview of the ways we interact with stakeholders can be found on our website.

Next steps

The survey is open for comments until 30 March 2018.

The European Securities and Markets Authority (ESMA) is launching its Interactive Single Rulebook, which is a new service for market participants and other interested stakeholders across the European Union.  The tool is launched today with the Level 1 text of the UCITS Directive, and links to all relevant Level 2 and Level 3 measures already available elsewhere on ESMA’s website. 

ESMA, in publishing this Interactive Single Rulebook, aims to facilitate the consistent application of the EU single rulebook for securities markets area. The new on-line tool provides, for Directives or Regulations in ESMA’s remit, a comprehensive overview of all implementing or delegated acts, guidelines, opinions and Q&As.

Next steps

ESMA’s objective is to provide an interactive version for each key level 1 text under ESMA’s remit incrementally, with the next texts being the Credit Rating Agencies Regulation and MiFID II/MiFIR.

The ESMA Board of Supervisors has recently appointed the following four stakeholders to become members of the Securities and Markets Stakeholder Group (SMSG):

  • Mrs. Blanaid Clarke, Professor of Corporate Law, Trinity College, Dublin, in the category of academics, as of 1 January 2018;
  • Mr. Geoffrey Bezzina, Executive Chairman, Office of the Arbiter for Financial Services, Malta, in the category of consumer representatives, as of 1 March 2018;
  • Mr. Juan Manuel Viver Gargallo, Consultant, Financial Consumer Protection, in the category of consumer representatives, as of 1 March 2018; and
  • Mr. Andreas Gustafsson, Senior Vice-President and Chief Legal Counsel Europe, Nasdaq, in the category of financial market participants, as of 1 June 2018.

All members are appointed for a period of two and a half years.  

The European Supervisory Authorities (ESAs) for securities (ESMA), banking (EBA), and insurance and pensions (EIOPA) have today issued a pan-EU warning to consumers regarding the risks of buying Virtual Currencies (VCs). 

The ESAs are concerned that an increasing number of consumers are buying VCs unaware of the risks involved. VCs such as Bitcoin, are subject to extreme price volatility and have shown clear signs of a pricing bubble and consumers buying VCs should be aware that there is a high risk that they will lose a large amount, or even all, of the money invested.

Non-regulated products and exchanges

Additionally, VCs and exchanges where consumers can trade are not regulated under EU law, which means that consumers buying VCs do not benefit from any protection associated with regulated financial services. For example, if a VC exchange goes out of business or consumers have their money stolen because their VC account is subject to a cyber-attack; there is no EU law that would cover their losses.

Operational problems

Some VC exchanges have been subject to severe operational problems in the past. During these disruptions, consumers have been unable to buy and sell VCs when they wanted to and have suffered losses due to price fluctuations during the period of disruption.

Background information

This Warning is based on Article 9(3) of the three ESAs’ founding Regulations and follows the publication of two statements by ESMA on Initial Coin Offerings in November 2017 and an earlier Warning to consumers and two Opinions on VCs published by EBA in December 2013, July 2014 and August 2016, respectively. 

VCs come in many forms. The first VC was Bitcoin, launched in 2009 and since then many other VCs have emerged. Most of them leverage on the distributed ledger technology, commonly referred to as Blockchain.

The European Securities and Markets Authority (ESMA) has today published its Risk Assessment Work Programme, setting out its priorities in assessing risks for securities markets for 2018. This Risk Assessment Work Programme provides an overview of the analytical, research, data and statistical activities by ESMA. 

As market data collected under the AIFMD, MiFID and EMIR mandates and others are becoming available, ESMA is – in close cooperation with the National Competent Authorities – completing the necessary technical infrastructure for their processing, programming routines for their management, and making them available for the relevant analytical evaluation.

ESMA will further enhance its risk monitoring capacities, generating market descriptive statistics as well as sophisticated risk indicators and metrics on the basis of new proprietary data. Most importantly for 2018, ESMA is planning to complement its ongoing market monitoring through our semi-annual Report on Trends, Risks and Vulnerabilities and our quarterly Risk Dashboards by launching an annual report series on EU derivatives markets, based on EMIR data, as well as an annual report series on EU alternative investment funds, drawing on AIFMD data.

In addition, ESMA will continue to pursue in-depth analyses around key topics, including market and fund liquidity, fund leverage, and the impact of innovation especially in the areas of market infrastructures and investment advice.

The 2018 Risk Assessment Work Programme complements ESMA’s other activity reporting documents, most importantly the Single Programming Document, the Regulatory Work Programme, the Supervisory Work Programme and the Supervisory Convergence Work Programme.

The European Securities and Markets Authority (ESMA) has today published its 2017 Annual Report and 2018 Work Programme setting out its main supervisory activities for credit rating agencies (CRAs), trade repositories (TRs), and third country central counterparties (TC-CCPs) in the EU. ESMA supervises eight registered TRs, 26 registered CRAs and four certified CRAs from third-countries. The report also details ESMA’s supervisory activities and achievements in 2017.   

Steven Maijoor, Chair, said:

“Our achievements in 2017 demonstrate how ESMA’s supervisory responsibilities play a key role in the EU’s objective of protecting investors and promoting financial stability.

ESMA has developed an improved risk assessment process and framework for TRs and CRAs, which allows us to better identify and evaluate supervisory risks. Our work on a number of common areas of focus for CRAs and TRs – internal controls, cloud computing, Brexit, fees, ancillary services – have delivered positive results and aided the development of supervisory tools.

Looking forward into 2018, ESMA will implement its new direct supervisory role under the Securities Financing Transactions Regulation. Our supervision will help to increase the transparency of shadow banking activities. In addition, ESMA will continue to actively engage with CRAs and TRs regarding strategy, governance, operational matters, and preparations for when the United Kingdom leaves the EU.

Finally, with the application of the Securitisation Regulation in January 2019, there will be significant preparatory work in 2018 with regards to the applications for registration of securitisation repositories.” 

 

2018 Supervisory Priorities

For CRAs and TRs in the EU, the key supervisory themes identified for 2018 are based on ESMA’s risk-based approach. In 2018, ESMA will prioritise its supervision on the quality of the credit rating process, including CRAs’ validation practices and the quality of data reported by TRs. ESMA will also continue to focus on information technology and internal control, in addition to governance structures and management quality. Common themes in the supervision of both TRs and CRAs on which ESMA will perform further work include Brexit, fees charged by CRAs and TRs, cloud computing and preparing guidelines for periodic information. The work on Brexit will be key for ESMA in 2018. By the end of the year all supervised entities should be ready if the UK leaves the EU under a cliff-edge scenario.

The report details the priority areas for supervision that ESMA has identified for TC-CCPs in 2018. These include assessment of 15 pending applications for recognition as TC-CCPs and monitoring the potential risks TC-CCPs might import into the EU. In addition, ESMA will monitor the impacts of Brexit on the third country CCP regime.   

2017 Achievements

ESMA’s supervisory work in 2017 delivered a number of concrete results. Important achievements were:

  • the work on fees charged by CRAs and TRs (which resulted in the publication of a thematic report at the beginning of January 2018);
  • the thematic review following the publication of the guidelines on validation;
  • the publication of the Endorsement Guidelines for CRAs;
  • Guidelines on Portability for TRs;
  • various Q&As for CRAs and TRs; and
  • ESMA’s Data Quality Action Plan delivered improvements in the quality of data reported by TRs.

 

Supervisory investments and enforcement

ESMA also launched investigations into the system development lifecycle of a TR and access to TR data by National Competent Authorities (NCAs). Further investigations into changes of analytical approach, rigorousness of CRA methodologies, interactions between CRAs and issuers and the issuance process of structured finance ratings were also carried out. ESMA also took enforcement action, most notably by levelling a fine of €1.24 million on a CRA for infringements of the CRA Regulation.   

The number of entities supervised by ESMA also grew in 2017. ESMA registered two additional TRs, the first new TRs since the end of 2013, bringing the total number of TRs registered in the EU to eight. The number of CRAs supervised by ESMA remained unchanged following the registration one new CRA and the withdrawal of another. 

The European Securities and Markets Authority (ESMA) has issued today final guidelines on the management of conflict of interests for central counterparties (CCPs).

Under the European Market Infrastructure Regulation (EMIR) CCPs have to put in place organisational arrangements and policies to prevent potential conflicts of interest and to solve them if the preventive measures are not sufficient. The final guidelines were developed following a public consultation in June 2017.

In order to ensure a level playing field across the European Union (EU), ESMA decided to develop guidance on CCPs management of conflicts of interests, in order to:

  • clarify how CCPs should prevent or mitigate the risks of conflicts of interest; and
  • ensure a consistent implementation across CCPs.

ESMA’s guidelines provide details on circumstances where conflicts of interests could arise and specifies the corresponding organisational arrangements and procedures to be set-up including in the case when a CCP is part of a group structure.

Next steps

The guidelines will be translated into the official languages of the EU and published on the ESMA website. Within two months of the publication of the translations, each national Competent Authority (NCA) will have to confirm whether or not it intends to comply with the guidelines.

The European Securities and Markets Authority (ESMA) has today updated its Questions and Answers (Q&As) regarding transparency and market structure issues under the Market in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

The purpose of these Q&As is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR. They provides responses to questions posed by the general public and market participants in relation to the practical application of transparency requirements.

The Q&A mechanism is a practical convergence tool used to promote common supervisory approaches and practices. ESMA will periodically review these Q&As on a regular basis to update them where required and to identify if, in a certain area, there is a need to convert some of the material into ESMA Guidelines and recommendations. 

The European Securities and Markets Authority (ESMA) has published its 2018 Supervisory Convergence Work Programme (SCWP), which details the activities and tasks it will carry out to promote sound, efficient and consistent supervision across the European Union (EU). 

The SCWP 2018 sets priorities that will drive ESMA’s convergence agenda in the year ahead and foster coordinated action by national securities and markets supervisors. While many of the 2017 priorities remain relevant for 2018, ESMA also sets new priorities, notably in the areas of financial innovation and the UK’s withdrawal from the EU.

For 2018, ESMA has identified the following priorities for supervisory convergence:  

  • Ensuring that MiFID II/MiFIR are applied in a sound, efficient and consistent manner across the EU (continuous);
  • Improving data quality to ensure efficient reporting under various requirements set by EU legislation (continuous);
  • Ensuring supervisory convergence in the context of the UK’s decision to withdraw from the EU (new);
  • Safeguarding the free movement of services in the EU through adequate investor protection in the context of cross-border provision of services (continuous); and
  • Monitoring developments in financial innovation, in particular through the analysis of emerging and existing instruments, platforms and technology (new).

These priorities have been developed in cooperation between ESMA and national competent authorities (NCAs) taking into account various factors, including the market environment, legislative and regulatory developments, and NCAs’ supervisory priorities. ESMA will strengthen its support to NCAs in facilitating an effective supervisory dialogue and day-to-day contacts fostering a common supervisory and enforcement culture.  

Steven Maijoor, Chair, said:

“Supervisory convergence is key to ensuring that EU regulatory requirements are applied in a consistent way across the EU, with the aim of supporting investor protection, orderly markets and financial stability while reducing arbitrage risks.

2018 promises to be a significant year in terms of our supervisory convergence work. This year, ESMA will focus in particular on the effective application of MiFID II/MiFIR during its first year of application. This entails fulfilling a coordinating role between NCAs to agree on common supervisory priorities, notably to achieve high quality data reporting.

Building on the 2017 agenda, ESMA will continue to address issues stemming from the provision of certain cross-border services that create risks to retail investors, including through possible product intervention measures.

Lastly, ESMA stands ready to facilitate coordinated action to address important challenges arising from the UK’s withdrawal from the EU as well as developments in financial innovation; both will have implications for ESMA’s supervisory convergence agenda in the year ahead.” 

MiFID II, Data and Brexit Key Convergence Priorities in 2018

The core elements of the priorities identified for 2018 include:

  • Making sure that MiFID II/MiFIR are applied in a sound, efficient and consistent manner across the EU. ESMA becomes a central source of information in respect of MiFID II/MiFIR implementation and fulfils a coordination role between NCAs to agree on common supervisory priorities and on consistent application of requirements.
  • Improving data quality to ensure efficient reporting under various requirements set by EU legislation remains a major focus of ESMA’s work, in line with ESMA’s Data Strategy.
  • Ensuring supervisory convergence in the context of the UK’s decision to withdraw from the EU. The Supervisory Coordination Network will continue discussing on an ex ante basis concrete cases of relocation to foster a common supervisory approach, among others on outsourcing and delegation. Similarly, NCAs’ approaches to firms’ contingency plans will continue to be discussed.
  • Safeguarding the free movement of services in the EU through adequate investor protection in the context of cross-border provision of services. ESMA will continue to watch that retail investors receive similar protection independently of the location of the firm providing services to them. In particular, ESMA will continue to monitor the marketing of complex and speculative products to retail investors on a cross-border basis, and facilitate an effective and coordinated response including through possible  product intervention measures.
  • Monitoring developments in financial innovation, in particular through the analysis of emerging and existing instruments, platforms and technology. ESMA expects the rapid pace of financial innovation developments across the EU securities markets to continue in 2018. ESMA is undertaking in-depth analysis of the emergence of instruments like virtual currencies, platforms like ICOs and tools like distributed ledger technology.

 

Next Steps

The implementation of the SCWP will be monitored and priorities may be readjusted depending on developments as ESMA will be working in a changing EU environment in 2018.

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