Today, the Association for Financial Markets in Europe (AFME), together with international law firm Simmons & Simmons, have published the first in a series of papers, entitled ‘LIBOR Transition: Managing the Conduct and Compliance Risks’. The paper provides practical guidance to Senior Managers and Legal and Compliance teams on managing conduct risks posed to firms engaged in the transition away from the London Interbank Offered Rate to Risk Free Reference Rates. This first paper in this series identifies ways in which firms can seek to mitigate the key conduct risks posed by LIBOR transition when establishing their governance structure. The publication of this guide follows the release of the FCA and PRA’s Dear CEO letter on Libor transition, subsequent FCA Feedback document, and the recent release of the FCA’s Questions and Answers on some of the conduct and compliance expectations during the transition period, which is scheduled to conclude by the end of 2021. The paper analyses qualitative responses from AFME’s Compliance Committee member firms, to understand the challenges in implementing risk management measures, and duly responds with suggested steps to establish a robust governance structure to mitigate conduct risk. Rather than offering a prescriptive checklist that may only apply to a handful of firms, the paper takes a broader view, basing the guidance on the fundamental understanding that different firms will be impacted by the LIBOR transition in different ways. Richard Middleton, Managing Director, Head of Policy at AFME, said: “It is vital that banks consider an effective governance framework for their LIBOR transition process. The FCA and PRA have highlighted the need for firms to identify and manage conduct risks, building mitigating actions into their planning for the transition.” LIBOR Leads Penny Miller and Elizabeth Williams at Simmons & Simmons, commented: “We are delighted to have co-authored with AFME the first in this series of market-leading papers, offering AFME members and the wider industry much-needed guidance for their Compliance teams when navigating the challenging landscape of LIBOR transition. We hope that it will serve as a helpful platform for wider industry and regulatory dialogue on how to manage the complexities associated with LIBOR transition and we look forward to working with the AFME Compliance Committee on the second part to this series.” Download the report here. -ENDS-

Following the publication of the final report by the European Commission’s Expert Group on Regulatory Obstacles to Financial Innovation (ROFIEG), James Kemp, Managing Director, Head of Technology and Operations at AFME, said: “This latest report is key to furthering the digital agenda in Europe over the course of the next Commission mandate. A strong technology agenda is essential for the EU to remain competitive and at the forefront of global innovation. Future success will depend on the ability to achieve long-term benefits from new technologies.” “AFME looks forward to supporting the work of the European Commission to ensure that there is a regulatory environment that nurtures innovation and helps EU financial institutions to take advantage of the vast range of opportunities FinTech presents.” AFME in particular welcomes the following parts of the report: The case made for harmonisation. The need to reduce fragmentation and ensure greater coordination and consistency in regulatory approaches is a pre-requisite for the development of a strong Financial Technology (FinTech) ecosystem in Europe. In this respect, the role allocated to the European Supervisory Authorities (ESAs) to ensure more effective coordination of innovation hubs and regulatory sandboxes is very welcome. The focus on ensuring a level playing field, notably through enhancement to the frameworks governing access to data, which is vital for supporting future competition. AFME recommends that EU authorities monitor and carefully analyse the impact of increased competition from new market entrants with a view to assessing the potential effect in areas such as financial stability, cyber security and resilience, data sharing and protection, consumer protection and lending standards. The endorsement of the principle of technology neutrality. A technology-neutral, principles-based approach is needed to encourage the adoption of new technologies, as well as for addressing any ethical and transparency concerns that may raise. The focus on ensuring strong consumer and investor protection. New technologies will only be adopted if users and customers can trust them. In this respect, it is important that the Commission takes steps to ensure that the potential financial stability and consumer protection risks linked to the development of FinTech are appropriately monitored. -ENDS-

Following today’s Announcement by the European Commission on the European Green Deal, Michael Cole-Fontayn, Chairman of AFME, said: “This European Green Deal is a material signal of the prominent role that the environment will play in the new Commission legislative cycle and will help to develop Europe’s global leadership on sustainable finance.” The banking sector is strongly committed to the transition to a carbon-neutral economy and AFME members remain highly supportive of initiatives that help to further integrate environmental, social and governance (ESG) considerations in the products and services offered to consumers and investors. The Commission’s intention to launch a new and more ambitious Action Plan on Green Financing is also a positive step which will encourage sustainable finance to become a more mainstream part of the European economy. AFME continues to support the industry in achieving the following key objectives, among many others: Ensure the smooth implementation of the EU-wide taxonomy of sustainable activities; Develop pragmatic approaches to climate risk management and risk sensitive approaches to the prudential treatment of sustainable assets; Work to implement agreed changes to corporate reporting and disclosures of climate related information. -ENDS-

In response to ESMA’s final report on the prices for market data and the consolidated tape for equities, Sean Barwick, Associate Director of Equities at AFME, said: “AFME welcomes ESMA’s final report on the price of market data and the consolidated tape for equities. Importantly, ESMA has recognised that the overall price of market data has increased and that pricing is not typically based upon the costs of producing and disseminating market data. Increased transparency requirements will help market participants and regulators to scrutinise pricing structures meaning that market data should be charged on a ‘reasonable commercial basis’, as required by MiFID II.” “We look forward to working with policymakers and regulators to ensure that ESMA’s proposals on market data are implemented and AFME looks forward to contributing to further dialogue on the establishment of a consolidated tape.” -ENDS-

Following a speech by the European Commission today in London, Oliver Moullin, Managing Director, Brexit, at AFME said: "We welcome the confirmation that the European Commission intends to extend the temporary equivalence decision for UK CCPs. This is vital to enable continued access to clearing and settlement services for EEA firms and avoid a significant risk to financial stability in a no-deal Brexit scenario. It is important that the extension is confirmed as soon as possible. "We hope that regulators in the EU27 and UK will continue to work together to address remaining regulatory issues, including finding a permanent solution to ensure access to UK CCPs and avoiding disruption to trading shares and derivatives in a no-deal scenario.” Notes to Editors: Together with 13 other trade associations, AFME recently wrote to European Commission Vice President, Valdis Dombrovskis to highlight the need for an urgent extension to the temporary equivalence determination for UK CCPs.

The Association for Financial Markets in Europe (AFME) has today published a new paper setting out fiverecommendations to deliver supervisory convergence on the regulation of crypto-assets in Europe. The paper’s recommendations are intended to encourage collaboration between regulators in Europe and work towards a common approach to the regulation and development of crypto-assets in financial services. James Kemp, Managing Director, Head of Technology and Operations at AFME, said: “There has been a rapid rise in the development of crypto-assets, which could offer significant benefits for wholesale markets. However, to realise those benefits, it is increasingly important that crypto-asset regulation is coordinated at the regional and global level to foster innovation, while promoting financial stability and ensuring a level playing field. This should start with forming a common understanding of the various crypto-asset terms and activities in financial services”. In this paper, AFME provides an overview of the crypto-asset taxonomies and regulatory approaches in use by a sample of National Competent Authorities across Europe, outlining the areas where divergence in regulation exists. The paper finds that while there is some convergence on the methods used to classify different types of crypto-assets, there is significant divergence in the methods used to regulate crypto-assets. This creates uncertainty for market participants, which limits innovation. Europe has the potential to become a global leader in crypto-assets and to facilitate the emergence of safe and innovative products and services at scale. In order to reduce fragmentation and deliver supervisory convergence in the regulation of crypto-assets in Europe, AFME proposes the following five recommendations for regulators to consider: Establish a pan-European crypto-asset taxonomy; Provide clear expectations for market participants on the process for issuing crypto-assets; Apply activities-based and technology agnostic regulation; Apply existing regulation for regulated activities, with any necessary amendments if required; Prioritise convergence of regulatory frameworks with other global and regional initiatives. The paper has been developed with expertise from AFME member firms to provide a further assessment of the crypto-asset regulatory landscape in Europe. It is available to download on the AFME website. -ENDS-

Today, 14 financial services trade associations wrote to European Commission Vice President, Valdis Dombrovskis to highlight the need for an urgent extension to the temporary equivalence determination for UK central counterparties (CCPs). Without such an extension, EU clearing members would not be able to continue as direct members of UK CCPs in the event of a no-deal Brexit, and EU counterparties would not be able to clear derivatives subject to the clearing obligation on those CCPs. The current temporary equivalence expires on 30 March 2020. The 14 trade associations signing the letter are AFME, FIA, ISDA, FIA EPTA, EFET, DAI, Eurelectric, SSDA, Assosim, AIMA, MFA, EFAMA, SIFMA AMG and EBF. The signatories of today’s letter argue that without a seamless ability to continue to clear transactions across borders in the event of a ‘no-deal’, Brexit will have a significant impact on companies and on the safety and soundness of the financial system. As argued in the letter: “It is important for the purpose of maintaining financial stability in the event of a "No Deal" Brexit for the Commission to provide this certainty in a timely fashion. It is also an important bridging measure to ensure that the transitional, anti-disruption protections for EU counterparties that have been negotiated under EMIR 2.2 will be available in the event that the UK is not ultimately found to be equivalent or in the event that UK CCPs are not able to obtain recognition (although we emphasise that we consider that it is of vital importance for financial stability that the necessary arrangements are put in place to ensure that UK CCPs are able to obtain recognition under EMIR 2.2).” The Associations request that the Commission amend the Implementing Decision on UK CCPs to extend the temporary equivalence until the date 18 months after entry into force of the relevant Commission delegated acts under EMIR 2.2, plus an additional three month period to allow UK CCPs to serve termination notices to EU clearing members in the event that their recognition is withdrawn following ESMA's review.” The letter can be downloaded here. -ENDS-

Traders in the investment management and banking industries are calling on the London Stock Exchange (LSE) and other European trading venues to review trading hours across Europe in a bid to improve culture, diversity and wellbeing on trading floors, and create more efficient markets. In a joint letter to the LSE and other European trading venues, the Association for Financial Markets in Europe (AFME) and the Investment Association (IA) have today requested a review into equity market opening hours across Europe, with a view to shorten operating hours from 8am - 4.30pm, to 9am - 4pm GMT (9am - 5.30pm, to 10am - 5pm CET). A reduction of 90 minutes in European markets would create more efficient markets, benefiting savers and investors. Currently, the first hour of trading often attracts little liquidity and subsequently is a more costly time to trade, while the final hour attracts around 35% of total daily volume. Shortening the hours would concentrate liquidity leading to more consistent trading costs and provide greater time for traders and the market to digest corporate announcements. The current opening hours for major trading venues in Europe are some of the longest in the world at 8.5 hours, when compared to other global markets, such as the US (6.5 hours) and Asia (6 hours), with traders expected to start their day long before markets open and close. This long hours culture impacts on traders’ mental health and wellbeing. It has also been identified as a key obstacle in recruiting and retaining more diverse talent, in particular for those with family or caring commitments. It is hoped the proposed shortened day could also have an impact on workplace culture by improving work-life balance, and providing a necessary step towards creating more diverse and inclusive trading floors. April Day, Managing Director, Head of Equities at AFME, said: “AFME and the IA are currently in discussions with the major European cash equity exchanges to explore a reduction to trading hours. A shorter trading day would not only improve market structure but would also go a long way towards building a more diverse trading floor and fostering better mental health. Equities trading risks lagging behind a wider financial services industry push for more diversity and inclusion unless the long trading day is tackled by an industry-wide approach.” Galina Dimitrova, Director of Capital Markets at the Investment Association, said: “From boardrooms to trading floors, we need to improve the ways our businesses work to create more inclusive environments where all employees can thrive. Shortening trading hours, enabling a better work-life balance could bring significant benefits to City workers and firms, who will be able to attract a broader diversity of talent. We have heard many deeply moving stories of traders’ mental health and personal life being impacted by their working hours. Whilst it is no silver bullet, we hope this European-wide review could start to lead to a step change in more efficient markets to the benefit of savers and those who operate them.” You can download the supporting proposal paper here ENDS -

The Association for Financial Markets in Europe (AFME) has today published a new paper setting out 14 recommendations to help realise the full potential of public cloud computing across the capital markets industry. The recommendations for banks, cloud providers, regulators, and the industry as a whole aim to increase the transparency and collaboration required to build further confidence, trust and capability in public cloud. James Kemp, Managing Director, Head of Technology and Operations at AFME, said: “The use of public cloud in financial services offers significant opportunities and benefits for all parties. However, to realise these and increase adoption it is vital that the whole industry, including banks, cloud providers and regulators, continue to collaborate. This includes ensuring the knowledge, skills, security and risks are appropriately assessed and identified throughout this long-term transformation.” Public cloud is expected to expand significantly across all areas of the capital markets value chain, with AFME members identifying the key benefits being greater business agility and innovation, improved cost management and efficiency, and enhanced client experience and service offerings. However, the paper outlines several barriers to this adoption at present, including legacy IT complexity, security implications, regulatory concerns, a lack of standardisation in cloud provider services, and long-term considerations on concentration risk, among others. Given these barriers, the paper finds that banks are still at an early stage of public cloud adoption. Over two-thirds of AFME members involved in discussions estimated that only 1 - 10% of their bank’s current workload was using some level of public cloud today. Public cloud adoption is currently being used in some of the following ways: capacity bursting (e.g. supporting existing resource intensive processes such as trade processing); running sophisticated data analytics (e.g. detecting market abuse); supporting innovation projects (e.g. quickly standing up a new project development and test environment), and improving resiliency (e.g. backup and archiving of data). In order to support continued public cloud adoption, AFME proposes 14 recommendations for banks, cloud providers, regulators, and the industry as a whole, with 4 key themes emerging: 1. Banks should design their public cloud strategy with a clear and realistic target operating model, review and reprioritise accordingly, and ensure executive sponsorship throughout adoption. 2. Cloud providers must continue to engage with banks and regulators to support building the capabilities and assurances required (e.g. legal, regulatory, privacy), and support increased standardisation that can also satisfy regulatory requirements. 3. Regulators can support greater regional and global harmonisation, in respect to requirements for both public cloud adoption and supervisory practices, that will reduce the complexity for banks adoption. 4. The industry as whole must continue to share knowledge, best practice, and promote standardisation and consistency, in how public cloud is adopted. The paper has been developed, with expertise from AFME Member firms, and Premium Associate Members, to provide further assessment of public cloud adoption in capital markets. -ENDS-

In response to the EU’s confirmation today that Article 50 will be extended until 31 January 2020, Simon Lewis, Chief Executive of AFME, said: “While uncertainty over Brexit continues, the extension to Article 50 avoids a no-deal scenario on 31 October. Europe’s banking industry has undertaken extensive work to prepare for a no-deal Brexit to ensure it can continue to serve clients across Europe. “We now hope that regulators in the EU27 and UK will work together to address remaining regulatory issues in the additional time, including avoiding disruption to trading shares and derivatives, ensuring continued access to UK CCPs and putting in place national contingency measures.” -ENDS-