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ISDA and FIA Urge Phased Implementation of MiFID II

By Samuel Wilkes
February 11, 2016, Risk

Industry associations are calling for a staggered implementation to Europe’s second Markets in Financial Instruments Directive (MiFID II), despite opposition from some national authorities. Under one of the proposed approaches, key elements of the rules would not take effect until December 2018 – two years after the originally planned start date.

On February 10, European authorities officially proposed a one-year delay to the January 2017 application date, but the associations argue this will not solve a sequencing problem that is baked into the framework. Some of its key transparency requirements depend on whether a given instrument is liquid or not, but this designation can only be applied after the rules come into force, they say. This is because it is unclear what is ‘traded on a trading venue’ – and only products receiving this tag will be subject to MiFID II’s pre- and post-trade transparency regime.

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Kay Swinburne: 'Approving MiFID Delay Won't Be Just a Nod'

By Tim Cave
February 12, 2016, Financial News

One of the European politicians responsible for rubber-stamping the one-year delay to an overhaul of E.U. trading rules has said the move could provide an opportunity to make limited changes to the reforms.

The European Commission published legislative proposals on February 10 that would delay the introduction of the revised Markets in Financial Instruments Directive by a year to January 3, 2018.

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Repo Stable Despite Book Decline Says ICMA

By Paul Walsh
February 12, 2016, The Trade

The repo market remains in a stable condition despite a reduction in repo books of Global Systemically Important Financial Institutions (G-SIFI) according to a survey by the ICMA.

In the results of its 30th semi-annual survey of the European repo market, which calculates the amount of repo business outstanding in December 2015, concluded that the repo market has remained flat at £5.6 trillion since July 2015.

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CFTC Too Broke to Properly Police Flash Traders, Massad Says

By Jesse Hamilton
February 10, 2016, Bloomberg Business

The top U.S. derivatives regulator said his agency needs more money to keep up with the Flash Boys.

Derivatives trading is “changing and innovating at the speed of light,” while the agency has been underfunded and needs money for technology and expert staff, Timothy Massad, chairman of the Commodity Futures Trading Commission, said during testimony at a House budget hearing on Wednesday. The transformation of the industry was highlighted in Michael Lewis’s book “Flash Boys,” which alleged proprietary traders used hyper-fast connections between markets to pick off investors whose orders sat in dark pools that used slower price feeds.

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Schelling Sees March Reckoning for E.U. Push on Transaction Tax

By Mark Barton, Rainer Buergin, and Rebecca Christie
February 11, 2016, Bloomberg Business

Austrian Finance Minister Hans Joerg Schelling said European efforts to agree on a common financial-transaction tax may fall apart if not enough nations are willing to move forward by next month.

At least nine countries must be on board for the tax plan to proceed under E.U. rules for “enhanced cooperation” when efforts among all 28 nations fail. The tax had as many as 11 backers, but is now at risk of falling to just eight, Schelling said in an interview in Brussels.

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Comment: Planning for the Unknown

By Brian Collings
February 11, 2016, FOW

There has been much discussion around the delays to the implementation of MiFIR/MiFID II, officially announced on February 10. The first sign that the delay was fact rather than market rumour was when the European Parliament issued a notice in November 2015 to say it had accepted the European Commission's request for a delay to the enforcement of the regulation for one year. At the time, the industry drew a sigh of relief knowing that it had extra time to make the necessary changes to legacy systems and processes to comply with the new rules; however, many in the industry are now saying that for this extra time to be of use, the final Regulatory Technical Standards (RTS) must be issued sooner rather than later.

It looks like the industry could be disappointed with the latest timeline as while European Securities and Markets Authority published a consultation paper on draft guidelines on the application of its final draft RTS, including transaction reporting under MiFIR on December 23 2015 (with responses due by 23 March 2016), the Authority is not expected to publish the final guidelines until the second half of 2016.

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Bank Data Executives Split on BCBS 239 Sanctions

By Steve Marlin
February 10, 2016, Risk

Bank risk data professionals appear to be divided on the question of whether regulators will levy fines or other penalties, such as capital add-ons, against firms deemed to be non-compliant with the Basel Committee on Banking Supervision's principles for effective risk data aggregation and reporting, known as BCBS 239.

"Everyone's behind their commitments in terms of not only the phases of implementation, but the depth of implementation as well," said Thomas Mavroudis, global head of data management at HSBC, speaking at a panel at the IBM Smarter Risk Summit in New York on February 9.

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Euro Area Stalls Deal to Shield London Banks from E.U. Rules

By Ian Wishart, Esteban Duarte, and Karl Stagno Navarra
February 12, 2016, Bloomberg Business

Envoys from euro-area governments balked at a draft European Union proposal to ringfence Britain’s financial industry, putting extra pressure on Prime Minister David Cameron before he meets German Chancellor Angela Merkel in Hamburg on Friday.

France led several euro-zone nations in objecting to pledges at a meeting in Brussels on Thursday, according to four people familiar with the talks. The EU plan would give the U.K. and other countries outside the single currency bloc freedom to set their own regulatory standards for financial institutions. Discontent from eastern European countries over proposed limits on welfare payments to foreign workers in the U.K. will be another hurdle for leaders to overcome when they meet on Feb. 18.

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SEC Rule Hikes Cost of Trading U.S. CDS for Non-U.S. Firms

By Peter Madigan
February 11, 2016, Risk

New rules adopted by the US Securities and Exchange Commission (SEC) earlier today (February 10) will make it more expensive for non-U.S. counterparties to trade U.S. single-name credit default swaps (CDS), while making it more difficult for foreign dealers to circumvent U.S. regulations. 

The SEC voted unanimously to approve final rules requiring security-based swap transactions "arranged, negotiated or executed" by staff in the U.S. on behalf of non-U.S. persons to be subjected to the agency's rules under Title VII of the Dodd-Frank Act.

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E.U.'s MiFID II Market-Rule Delay Seen as Too Little, Too Late

By Julia-Ambra Verlaine, Silla Brush and Birgit Jennen
February 10, 2016, Bloomberg Business

The European Union’s plan to push back the start date of MiFID II, an overhaul of market rules covering everything from derivatives trading to bond pricing, by a year to 2018 ran into opposition from some lawmakers before the ink was dry on the press release. This adds to uncertainty about whether 12 months are enough.

The European Commission, the E.U.’s executive arm, proposed the delay on Feb. 10 to “take account of exceptional technical implementation challenges faced by regulators and market participants.” The European Securities and Markets Authority had pushed for an extension because there wasn’t sufficient time for banks and other financial institutions to build necessary data-reporting systems before the original 2017 deadline.

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