1/9/2017
Royal Bank of Scotland - Email Communication
Royal Bank of Scotland
Corporate & Institutional Banking
MiFID2 Briefing Update - May 2016
MiFID2 back in the news...
After a quiet period, MiFID2 was back in the news during April & May with the European Commission
endorsing ESMA's technical standards with certain provisos, and adopting the three delegated acts that were
first expected in late 2015, and the European Council confirming the proposed implementation delay.
Timings
Implementation
Brussels has all but finally approved a 12 month implementation delay, meaning go-live will be 3rd January
2018.
Will there be further delays? There have been requests, but we think it more likely that a pragmatic, phased
approach will be allowed, rather than the ‘Big-Bang’ approach originally envisaged.
Knock-on Effect on Other Regs
MiFID2 has a new, universal definition of spot and forward FX which do not fall within the scope of MiFID
instruments, which will impact the existing EMIR requirements and potentially the future scope of Packaged
Retail and Insurance-based Investment Products (PRIIPs).
Is there any 'New News'?
Key recent developments of interest are drawn out in the table below:
Development
Context
So what?
Transparency
Considerable push-back on the initial rules in several
places:
This should mean there
will be less of a shock
transitioning into the new
regime.
Waiver thresholds lowered and liquidity
qualification increased for bonds and OTC
derivatives
Repos or SFTs confirmed as being out of
scope
This is a late surge in
pragmatism, if borne out in
the final text.
Same for packaged transactions (where
previously if one leg was ‘disclosable’, the
whole package was)
Spot FX
The Delegated Acts (DAs) have confirmed that a Spot
contract is:
T+2 settlement for majors (defined), up to T+5
for securities payment and locally accepted
standard for non-major currencies
A physically-settled means of payment, where
one counterpart is an NFC, and there are
identifiable goods, services or direct
investment underlying
Whilst there is no timing constraint on the
Clarity here means that the
‘Commercial Purpose’
exemption that corporate
clients in UK currently enjoy
for Forward FX transactions
(in terms of EMIR) will be
curtailed if dealt on a
trading venue.
It is not yet clear what
evidencing standard might
be required to demonstrate
"identifiable goods &
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Royal Bank of Scotland - Email Communication
payment, it cannot be traded on a trading venue
(RM, MTF, OTF)
Research
The DAs have confirmed that short-term comments
that provide a brief summary of a firm’s opinion are of
a scale that can be deemed “an acceptable minor nonmonetary benefit”.
services" in order to apply
exclusion to FX contracts.
Sales notes, outlining a
short-term idea are not
inducements, meaning
they can be provided free of
charge.
Note there is still a MAR
impact for these opinions.
Own Account
Exemption
(noncommodities)
L1 to be amended so that non-financial entities
(NFCs) dealing on own account on a trading venue in
order to hedge their (or their group’s) commercial or
treasury financing risks, will no longer be required to
complete MiFID registration.
This provides an important
safe harbour for corporates
from MiFID registration, for
all own account hedging
activity
This will include direct membership and direct
electronic access.
What's next?
We expect the continued drip feed of announcements and clarifications, and an evolving understanding
within the industry on how the MiFID2 requirements will apply in practice.
With mandatory clearing and margin for non cleared dominating the OTC agenda in the second half of 2016
and first part of 2017, and both ICB ring-fencing of UK banks, and the global roll out of the new capital rules
under the Fundamental Review of the Trading Book (FRTB) for January 2019, MiFID2 / MiFIR will be vying for
attention and resources in a crowded field over the next 18 months.
As the saying goes, "May you live in interesting times."
For further information please contact Markets Regulation team.
Information accurate as of 31 May 2016
The Royal Bank of Scotland © 2016 (Disclaimer)
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