The Association for Financial Markets in Europe (AFME) has today responded to the European Commission’s Consultation on Post-Trade in a Capital Markets Union (CMU). This important consultation will help the Commission determine the needs and priorities in European post-trade reform. Werner Frey, Managing Director, Post Trade at AFME, said: “The European Post-Trade Forum (EPTF) Report and this consultation are an important milestone in much-needed European post-trade reform. As a next step, we are very much in favour of dismantling the narrowly defined EPTF Barriers with a view to promoting the global competitiveness of European capital markets. At the same time, a strategic plan for a comprehensive European post-trade reform should be developed.” AFME’s consultation response finds that there are two interrelated parallel processes required to successfully promote European post-trade reform and a well-functioning CMU: the swift dismantling of the EPTF Barriers that have deliberately been narrowly defined to facilitate the implementation of the proposed solutions in the CMU context; and the development and implementation of a longer-term strategy for comprehensive European post-trade reform. With respect to dismantling the EPTF Barriers, AFME: strongly supports the EPTF Report, its analysis and proposed solutions; advocates the inclusion of all prioritised EPTF Barriers in the CMU Action Plan; proposes to continue the close and institutionalised cooperation between the public and the private sector to monitor the dismantling of all EPTF Barriers; believes that the dismantling of the EPTF Barriers should start without delay and therefore should not be made dependent e.g. on possible future benefits derived from technological developments such as DLT or the outcome of Brexit negotiations; suggests intensifying the dialogue with Member States in a bespoke and targeted manner as part of the aforementioned public-private partnership. With respect to the development and implementation of a longer-term strategy for comprehensive European post-trade reform, AFME: stresses the importance of progress on the EPTF barriers emphasizes that progress on the EPTF barriers will facilitate longer-term strategic steps refers to the AFME Post-Trade White Paper proposes the setup of a strategy group by the European Commission, the mandate of which should inter alia include:-the definition and the objectives of a comprehensive European post-trade reform;-an assessment of the likely impact of technological developments, based on an analysis to be performed of the conditions precedent, such as the legal and regulatory framework for such technological developments;-an assessment of the degree to which the successful dismantling of the EPTF Barriers achieves the defined objectives; -an analysis in regard of the timeliness of current post-trade processes including their rationale; -high level proposals for achieving the defined objectives. AFME finds that the following areas in particular require more in-depth work: systemic risk /risk transmissions in the settlement space harmonisation of tax processes collateral management AFME’s full consultation response can be found here. – Ends –

AFME and IA's Equities Electronic Trading Questionnaire - version twoClick here to download The Association for Financial Markets in Europe (AFME) and the Investment Association (IA) have today published an updated version of the Equities Electronic Order Handling Questionnaire incorporating the obligations and requirements set out under MiFID II. The initiative, which was originally launched in March 2016, establishes a common framework for buy-side clients to request information from electronic trading providers in the European equity markets. The Questionnaire assists in facilitating the fair and accurate sharing of information on the operation of algorithms between investors and their broker-dealers. Through this process, it aims to enable safer and more efficient algorithmic trading. Since its launch, the initiative has gained increasing traction as market participants recognise the benefits of having a standard framework. April Day, Managing Director, Equities at AFME, said: “With MiFID II due to be implemented in January 2018, the Questionnaire covers electronic trading practices, including how an individual firm’s processes and decision-making frameworks facilitate best execution. Expanding on the requirements last set out in ESMA’s guidelines on systems and controls for automated trading, we have updated our Questionnaire to incorporate the obligations and requirements which are applicable under the new regime. The aim is to ensure that it remains a useful way to efficiently manage the exchange of important information on electronic order handling and dissemination of change notices.” Ross Barrett, Capital Markets Specialist at the IA, said: “This initiative is a best practice example of the Buy and Sell Sides successfully coming together to improve the practices involved in algorithmic trading. We have updated the Questionnaire to ensure that as soon as MiFID II comes into effect both sides can continue to benefit from the standard framework it offers. The publication of this Questionnaire is one example of how the industry is taking the initiative to improve the transparency and efficiency of markets to the benefit of the end investor.”Split into seven sections, the questionnaire covers best execution, trading venue selection, algorithmic trading, non-displayed liquidity, transaction cost analysis, client confidentiality and risks and controls.The scope of the Questionnaire is limited to equity/equity-like European Economic Area (‘EEA’) securities which are traded through a firm based in the EEA that is a regulated firm under MiFID and associated national laws, unless otherwise specified.The full Questionnaire can be found on both AFME and the IA’s websites. – Ends –

The Association for Financial Markets in Europe (AFME) has today signed up to the Women in Finance Charter. The Charter aims to improve gender balance at all levels in financial services, with a particular focus on senior management. Simon Lewis, Chief Executive at AFME said: “We are proud to be joining many of our member firms in signing up to the Women in Finance Charter. The number of women at board and executive committee level is gradually improving in European financial services, although there is still much work to do in boosting female representation. We believe that being more representative of society brings benefits across the board, from better workplace culture through to improved financial performance.” By signing the Women in Finance Charter, AFME has pledged to: set a target of 30% female representation in senior management by January 2021; publish annual progress against this target on our website; have a member of our senior executive team who is responsible and accountable for gender diversity and inclusion; and have an intention to ensure the pay of the senior executive team is linked to delivery against these internal targets on gender diversity. – Ends –

Following the communications by the European Commission and the US Securities and Exchange Commission (SEC) today announcing Measures to Facilitate Cross-Border Implementation of the European Union's MiFID II's Research Provisions, Simon Lewis, Chief Executive of the Association for Financial Markets in Europe, said:“The issuance of no-action relief by the SEC today and clarifications from the Commission are very much welcomed by the industry as it will ensure that EU firms continue to be able to access US research for 30 months from 3 January 2018.“Thanks to a globally coordinated effort by banks, investors and other industry participants, together with authorities, a workable solution on the provision of cross-border research has been achieved, enabling market participants to continue to provide research to all types of investors. This enhances market liquidity and is also important for equity issued by small and medium enterprises (SMEs), which promotes economic growth.”– Ends –

Following the communication by the European Commission today calling for the completion of the Banking Union, Simon Lewis, Chief Executive of AFME, said: “AFME has supported the Banking Union since its inception. We fully support the Commission’s call today for the European Parliament and Member States to take political responsibility and agree on the necessary legal acts to complete Banking Union by 2019. Significant progress has already been made, thanks to the Single Supervisory Mechanism and Single Resolution Board, but we must keep up the momentum to complete this important project.”He added: “Clear improvements in financial stability safeguards have been made and banks are much less likely to fail. The Banking Union must now enable efficient internal capital allocation within cross-border banks as this allows resources to flow to where they are most needed by European households, SMEs, and corporates. A crucial next step is to allow prudential requirements to apply on a consolidated basis to banks that are subject to direct supervision of the ECB.” AFME also commented in more detail on the following aspects of the Banking Union package: On Risk Reduction through the November 2016 Banking Package: AFME supports the objective of reducing risks in the banking sector. In this context, AFME welcomes the Commission’s aim to see key risk reduction measures agreed in Europe by mid-2018, so long as these are not dependent on ongoing Basel Committee work or are inappropriately calibrated. For instance, clarity for banks on the eligibility criteria for MREL-eligible instruments and the amount of MREL required is vital to help ensure banks can continue to build up the necessary loss-absorbing and recapitalisation resources. AFME reiterates its call for the co-legislators to carefully consider elements of the RRM package that risk damaging Europe’s capital markets and market participants. The new market risk capital requirements, which are still being debated by the Basel Committee, are one example of poorly calibrated rules which could negatively impact the Capital Markets Union (CMU) project if left unchanged. We recall the need to also maintain momentum on finalising the building blocks of the CMU by 2019. AFME also wishes to highlight significant concerns on the proposed new moratorium tools for supervisors and resolution authorities referred to in today’s Communication. These depart from internationally agreed standards and could likely have a counterproductive, destabilising effect on financial markets by heightening incentives for counterparties to run from banks at the earliest sign of distress in anticipation of a moratorium being applied. On Setting up a Backstop to the Banking Union: AFME welcomes the commitment to further reinforce the financial stability of the Banking Union by seeking to create the common fiscal backstop to the Single Resolution Fund (as agreed by Member States in 2013). This is vital to provide confidence in the sources of liquidity that will be available to resolution authorities when resolving a bank. On Actions to Address Non-Performing Loans (NPLs): AFME strongly supports actions to remove impediments to the development and deepening of secondary markets for NPLs and distressed debt. We welcome in particular the consideration of measures to remove undue impediments to the transfer of loans and loan servicing by third parties, as well as proposals to improve the availability and comparability of data on NPLs. We recommend however that these should leverage the information already provided by banks through existing channels. Any additional regulatory and supervisory actions should remain targeted to deal with banks and countries with high NPL stocks. We are concerned that the inclusion of non-proportionate and ambitious prudential backstops, among other actions, could generate unnecessarily high costs to certain banks that have dealt, or are effectively dealing, with their NPL stocks, with potential consequences for loan supply. Care should also be taken to avoid multiple, overlapping requirements when new expected losses provisioning under IFRS9 become live shortly. – Ends –

Following the speech made by the UK Prime Minister today in Florence, Simon Lewis, Chief Executive at the Association for Financial Markets in Europe (AFME) said:“We welcome the UK Government’s call today for a ‘time-limited implementation period’ after March 2019. We believe that transitional arrangements will be vital to give businesses, banks and investors time to adjust in order to avoid damaging cliff edge effects. They are also necessary to support the objectives of an orderly withdrawal, ensuring financial stability and the prosperity of both the EU27 and the UK.“We urge the negotiators to reach agreement as soon as possible on the items under discussion in phase one of the negotiations in order to have clarity on transitional arrangements.”– Ends –

AFME has today published a new guide to MiFID II/MiFIR Post-Trade Reporting Requirements: Understanding Bank and Investor Obligations.With new post-trade reporting requirements due to come into force in January 2018 under the revised Markets in Financial Instruments Directive (MiFID II), this educational document has been drafted for use primarily by banks and investors to better clarify which party has the reporting obligation. It also highlights the key challenges and practical implementation options for investment firms to consider as they progress with plans to be MiFID II compliant.As MIFID II expands the scope of the post-trade reporting obligation beyond the existing MIFID requirements, this poses a number of new complexities around the who, what, when and where of reporting. Following a recent rapid increase in technical inquires originating from various market participants, AFME put together a Post-Trade Transparency (PTT) Working Group of cross asset-class experts to draft this document which aims to clarify such issues. Simon Lewis, Chief Executive at the Association for Financial Markets in Europe said: “The MiFID/MiFIR post-trade reporting regime is complex for market practitioners. With the MiFID II deadline fast approaching in January 2018, the implementation of post-trade transparency rules will require a near real-time public reporting of detailed information for the majority of trades across a range of asset classes. We hope this document will provide helpful clarity and raise bank and investor awareness of the forthcoming requirements.” Harps Sidhu, Head of Capital Markets Consulting, KPMG UK adds: “MiFID II is one of – if not the – single biggest and most significant piece of regulation hitting investment firms since 2008. It will reshape the face of European capital markets and will have a major impact on firms from both a commercial and operational perspective. Despite, its size, scope and technicality, there is no phase-in period so firms have to be ready for immediate implementation on 3 January 2018. Today’s guide to MiFIR Post-Trade Reporting will be invaluable in helping firms achieve that.” Matt Coupe, Director Market Structure EME at Barclays said:“Post-trade transparency reporting will affect all EU investment firms and the industry needs to be thinking through the details of this requirement ahead of MiFID II implementation in January 2018. Trade reporting is a complicated subject so this document was designed to look at the different scenarios and clearly outline how they work. We hope this report offers the industry clarity on reporting obligations as firms progress plans to ensure they are compliant with MiFID II.” The document aims to provide a structured approach to meeting the post-trade transparency obligations defined under Article 6, 10, 20, and 21 of MiFIR. Primarily, the document covers: Firms impacted by MIFID II’s post-trade transparency requirements The data that is to be reported When and where the data is to be reported Reporting scenarios case studies Challenges that the impacted participants will need to consider in order to implement the necessary reporting solutions Explanation of terms such as Approved Publication Arrangements (APAs), Systematic Internaliser (SI) and post-trade transparency deferrals

Following the publication today by the European Commission of its proposal for a Directive on the review of the European Supervisory Authorities, Simon Lewis, Chief Executive at the Association for Financial Markets in Europe (AFME) said:“The European Supervisory Authorities (ESAs) play an important role in the European regulatory landscape. We welcome the move towards more integrated supervision to foster CMU and financial integration. The reforms proposed today by the Commission will ensure that the ESAs continue to function well and pursue a common EU approach in a changing political and market environment.“AFME is supportive of the strengthening of some of the existing powers of the ESAs to ensure supervisory convergence. We also welcome the Commission’s aim to establish more effective governance of the ESAs, through the creation of independent Executive Boards, in order to empower their decision-making in favour of broader EU interests. We agree that the ESAs need appropriate funding in order to allow them to be adequately equipped to deliver on their ambitious agenda. The idea of ESMA receiving transaction data directly from market participants is to be supported to the extent it does not lead to additional reporting burden or duplication.” – Ends –

The Association for Financial Markets in Europe (AFME) announces that Jacqueline Mills has been appointed as Head of AFME’s Frankfurt Office which was opened earlier this year. Jacqueline has been a senior member of AFME’s Prudential team since 2014, most recently leading AFME’s work on the European Commission’s proposals for a new Capital Requirements Directive and Regulation (CRD5 and CRR2). She is also responsible for AFME’s Supervisory Committee which focuses on European Central Bank (ECB) supervision and supervisory convergence in the EU. Simon Lewis, Chief Executive of AFME said: “We are delighted to appoint Jacqueline Mills to this important role in Frankfurt. She combines a deep knowledge of prudential and supervisory matters with considerable experience working for and with other European trade associations. “Frankfurt is an important financial centre and given AFME’s mission to act as a bridge between market participants and policymakers across Europe, Jacqueline’s appointment is a significant step forward for this project.” Jacqueline will take up her post from 1 October and will be permanently based in Frankfurt from 1 January 2018. She will be responsible for deepening key relationships with Frankfurt based supervisors and policymakers. In particular, these include the ECB, the ECB’s Single Supervisory Mechanism, and the European Systemic Risk Board. Over time, AFME anticipates that this will be expanded to cover other regulators and institutions and financial market participants in Germany. Before joining AFME, Jacqueline spent 10 years at Leaseurope, as Director of Asset Finance and Research Division, where she led policy work on prudential regulation and international accounting standards and was responsible for building out a research programme and promoting the industry at European level. She has also worked for Deloitte and Eurofinas in Brussels and at the Université Libre de Bruxelles. – Ends –

UK Finance and AFME have today published a joint paper “Impact of Brexit on cross-border financialservices contracts”. The paper examines the UK and EU market place for cross-border provision offinancial services and the potential impact on the existing stock of cross-border contracts. It identifies key issues around contractual uncertainty resulting from the UK’s exit from the EU in March2019 and suggests potential ways of addressing these. This includes the need for an agreement toenable existing contracts to continue and run to maturity. Commenting on the paper, UK Finance CEO Stephen Jones said: “Contractual uncertainty of crossbordercontracts post-Brexit needs to be addressed promptly by all parties to avoid damaging impactsfor customers on both sides of the Channel. This issue is wide-ranging and not just limited to banking,affecting cross-border products and services across payments, insurance and investment managementservices also. Early action is essential to provide clarity that these contracts will continue post-Brexit.” Simon Lewis, Chief Executive of AFME said: “It is estimated that EUR1.3 trillion of UK-based bankassets are related to the cross-border provision of financial products and services – many of whichsupport EU exporting businesses that are key drivers of growth. EU and UK businesses are increasinglyconcerned about the potential impact of Brexit on the continuity of their existing contracts. Early actionto clarify that these contracts will continue following Brexit is therefore critical. As part of AFME’s factbasedpan-European approach, we have come together with UK Finance to highlight the importance ofthis issue.” The joint UK Finance and AFME paper “Impact of Brexit on cross-border financial services contracts”identifies the following critical issues: The regulatory framework and passports that have enabled EU-based customers to access a diverse suite of cross-border financial products and services from UK based banks (and vice versa) will cease to apply after UK exit. These services include lending and capital markets, risk management and foreign currency products and services and span the entirety of the financial services sector, including banking, payments, insurance and investment management. Its estimated EUR1.3 trillion of UK-based bank assets are related to the cross-border provision of financial products and services to a variety of customers from governments to businesses to individuals; There is a shared interest in the UK and EU to find a solution – without this each contract will need to be individually assessed to determine if elements to be performed constitute a regulated activity no longer authorised under the EU passporting regime and whether the national laws of the Member State where the customer is located nonetheless permit the activity, creating complexity and uncertainty; Contracts between EU27 businesses and UK-based banks may need to be transferred, restructured, or potentially terminated. In addition businesses may need to look for alternative financing providers to ensure they can meet their commercial objectives. Potential implications of such restructuring include: significant demands on management time for the businesses, one off reorganisation costs, crystallisation of tax liabilities (where repayment triggers a capital gain), ongoing expenses where it is not possible to restructure a contract on a like-for-like basis, increased credit risk and impact of losing the benefit of netting positions. Alongside a transitional period, early action is required to provide the necessary clarity that these contracts will continue following the exit of the UK and the EU: Both sides should confirm at the earliest opportunity the principles established in the EU negotiating directives that the right to trade goods on the market at the point of exit must be preserved and extended to services and to avoid contractual uncertainty. Transitional arrangements should be structured in a way to protect existing contracts for the duration of the transitional arrangements. EU Member States should consider legislation to ensure contractual continuity for a specified number of years where appropriate / required. The UK should use the European Union (Withdrawal) Bill to provide the same. There is precedent for dealing with this sort of situation. For example, an EU-wide solution was adopted to address the uncertainty around the introduction of the euro currency and around the new regulations on OTC derivatives, central counterparties and trade repositories. Click here to read the paper