COVID-19

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today published its Final Report on draft Regulatory Technical Standards (RTS) for commodity derivatives under the MiFID II Recovery Package. The draft RTS include proposals on the application procedure for position limit exemptions, a methodology to determine position limits and position management tools for trading venues, which will contribute to stable and orderly commodity derivative markets at a time of heightened scrutiny.

Under the MiFID II Recovery Package, position limits will only continue to apply to agricultural commodity derivatives and to critical or significant commodity derivatives defined in Level 1 as commodity derivatives with a net open interest above 300,000 lots over a one-year period. As part of the implementation measures of the new framework, ESMA and the national competent authorities have also separately agreed on a procedure to ensure convergence in the calculation of the open interest and the determination of whether a commodity derivative qualifies as critical or significant.

Proposals

The draft RTS on the application procedure for the new position limit exemptions and the methodology for position limits have been incorporated into a broad new draft technical standard, together with some amendments to the existing framework suggested by ESMA. The new draft RTS 21a will repeal the existing RTS 21.

The new draft RTS on position management controls provides additional tools for market monitoring by trading venues trading commodity derivatives. The establishment of accountability levels means that market monitoring is being improved at a time when the reliability and efficiency of commodity derivative markets is facing heightened scrutiny.

Next steps

The European Commission has three months to decide whether to endorse the draft technical standards. The revised MiFID II regime for commodity derivatives will apply at the end of February 2022.

 

Further information:

Dan Nacu-Manole

Communications Officer

   +33 (0)1 58 36 52 06

@   press@esma.europa.eu

The European Securities and Markets Authority, the EU’s securities markets regulator, is committed to contributing to a more sustainable financial system, as part of the European Green Deal and global efforts to deliver on the United Nations’ COP26 objectives on combatting climate change.

Sustainable Finance

Sustainable Finance - ESMA

European financial markets are at a point of change: investor preferences are shifting towards financial products that incorporate environmental factors. Moreover, environmental factors are increasingly affecting the risks, returns and value of investments. Considering these challenges, ESMA has a key role in helping investors better understand the impact of environmental, social and governance (ESG) factors on their investments and how an investment contributes to a sustainable future. To support this work, ESMA published its Strategy on Sustainable Finance , in February 2020, setting out concrete steps to integrate ESG factors across all areas of its activity.  

ESMA actively contributes to the development of the sustainable finance rulebook and to its consistent application and supervision taking the necessary measures to promote investor protection across the EU. ESMA also engages in risk assessment and market monitoring activities focusing on potential financial stability risks stemming from ESG factors.

ESMA’s support for international cooperation

ESMA believes that international cooperation is key to ensuring that consistent measures are taken to protect investors and secure financial stability as the demand for sustainability-related financial products increases. In this regard, ESMA supports, and participates in the work of IOSCO and its Sustainable Finance Task Force, as well as the relevant activities of the Network for Greening the Financial System and the Financial Stability Board.

Building an internationally comparable set of rules and principles that are applicable across the entire sustainable investment value chain is essential to address the global challenges facing financial markets due to climate change.

ESMA’s sector-specific contributions to sustainable finance

ESMA’s key contributions are summarised below:

  • Investment Management – with the EBA and EIOPA, developed disclosure requirements aimed at promoting transparency in the field of sustainable investing and at addressing greenwashing risk.
    • Next: ESMA will assist National Competent Authorities (NCAs) in being effective and consistent in their supervision of investment managers issuing products with sustainability characteristics and objectives. 
  • Issuers – provided advice to the European Commission on the content and methodology for the sustainability indicators pursuant to Article 8 of the Taxonomy Regulation.
    • Next: ESMA will actively contribute to the development of sustainability reporting standards and foster common supervisory approaches in this area.
  • Benchmarks – issued Q&As on EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and on sustainability disclosures for benchmarks in general.
    • Next: ESMA will promote effective and consistent supervision across NCAs in relation to climate benchmarks and to the application of sustainability disclosures requirements for benchmarks.
  • Credit rating agencies (CRAs) – issued technical advice on sustainability considerations in the credit rating market as well as guidelines on disclosure.
    • Next: ESMA will assess the way CRAs incorporate ESG factors in their methodologies for credit ratings and outlooks and how CRAs ensure the robustness of their methodologies.
  • Investment firms and investment funds – provided technical advice to the European Commission on the integration of sustainability risks and factors in the internal processes and risk management of these entities.
    • Next: ESMA will review the suitability and product governance guidelines, to incorporate sustainability factors.
  • ESG risk assessment and market monitoring activities – conducts monitoring and reports on a bi-annual basis in its Trends, Risks and Vulnerabilities report.
    • Next: ESMA will continue monitoring and assessing ESG-related market developments and risks and work on further integrating climate risks, for example in its stress testing framework.
  • EU Green Bond Standard – responded to the European Commission’s targeted consultation on the establishment of the EU Green Bond Standard (GBS)
    • Next: ESMA will prepare for possible supervisory responsibilities arising from the EU GBS legislative proposal

 

Further information:

Dan Nacu-Manole

Communications Officer

   +33 (0)1 58 36 52 06

@   press@esma.europa.eu

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today launched a consultation, as part of the post-Covid MiFID II Recovery Package, seeking input from market participants on its draft Technical Standards for commodity derivatives.

ESMA’s proposals relating to the application of position limits to commodity derivatives focus on:

  • developing procedures for financial entities undertaking hedging activities and for liquidity providers to apply for an exemption from position limits; and
  • suggesting other technical adjustments to improve the application of the position limit regime in practice.

In addition, the Consultation Paper also contains ESMA’s proposals for technical standards on position management controls.

The consultation forms part of ESMA’s mandates under of the MiFID II Recovery Package, a set of measures aimed at supporting the recovery from the severe economic shock caused by the Covid-19 pandemic.

Next steps

The consultation closes on 23 July 2021, following which ESMA will consider the responses received, finalise the draft technical standards and submit a final report to the European Commission for endorsement by November 2021.

 

Further information:

Dan Nacu-Manole

Communications Officer

   +33 (0)1 58 36 52 06

@   press@esma.europa.eu

 

Consultation Paper - Technical standards for commodity derivatives - MiFIDII Recovery Package

The European Securities and Markets Authority (ESMA), as part of the post-Covid MiFID II Recovery Package, is seeking input from market participants on its draft Technical Standards for commodity derivatives.

Responding to this paper

ESMA invites comments on all matters in this paper and in particular on the specific questions summarised in Annex 1. Comments are most helpful if they:

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, recommends to the European Commission (EC) to permanently lower the threshold to notify net short positions on shares to national competent authorities (NCAs) from 0.2% to 0.1%.

ESMA has examined the evidence gathered after its successive emergency decisions, beginning in March 2020, which lowered, for the first time, the notification threshold to 0.1% on a temporary basis.

The analysis showed that a substantial amount of additional and essential information became available to NCAs due to the reporting of net short positions at the level of 0.1%. This additional transparency to NCAs of the real level of net short positions established in the market translates into an improved ability by NCAs to conduct market oversight. ESMA therefore considers it essential to lower the reporting threshold to 0.1% on a permanent basis.

Next steps

The EC may adopt a delegated act modifying the notification threshold in Article 5(2) of the Short Selling Regulation.

 

Further information:

Dan Nacu-Manole

Communications Officer

   +33 (0)1 58 36 52 06

@   press@esma.europa.eu

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has decided not to renew its decision to require holders of net short positions in shares traded on a European Union (EU) regulated market, to notify the relevant national competent authority (NCA) if the position reaches, exceeds or falls below 0.1% of the issued share capital. The measure, which has applied since 16 March 2020, will expire on 19 March 2021.

ESMA’s view is that with GDP forecasts showing moderate optimism for recovery, volatility decreasing and the main EU stock indices close to pre-pandemic levels, the current situation in financial markets no longer resembles the emergency situation required by the Short Selling Regulation to maintain the measure.

The overall level of net short positions is decreasing across the EU, reducing the risk that selling pressures could initiate or exacerbate potential negative developments connected with the evolution of the pandemic.   

The last renewed decision expires on 19 March 2021. Therefore, the last reporting where the lower threshold of 0.1% applies will be in relation to Friday, 19 March 2021, and must be reported to NCAs by 15.30 of Monday 22 March 2021.

From 20 March 2021 onwards, positions holders will need to send notifications only if they reach or exceed the 0.2% threshold again, while any outstanding net short position between 0.1% and 0.2% will not have to be reported.

The EFTA Surveillance Authority, in cooperation with ESMA, has also decided not to renew their current measure applicable to EEA EFTA States' markets, that will therefore also expire on 19 March 2021.

The decision requiring net short position holders to report positions of 0.1% and above was first introduced on 16 March 2020 and was renewed in June 2020, September 2020 and December 2020.

Next steps

ESMA, in coordination with NCAs, will continue to monitor developments in financial markets as a result of the COVID-19 pandemic, and is prepared to use its powers to ensure the orderly functioning of markets, financial stability and investor protection.

 

Further information:

Dan Nacu-Manole

Communications Officer

   +33 (0)1 58 36 52 06

@   press@esma.europa.eu

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