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1. MIFID II
1.1 ESMA presents the results of the 2021 CSA on MiFID
II product governance requirements
On 8 July 2022, the European Securities and Markets Authority
(ESMA) published a public statement presenting the results of
common supervisory action (CSA) on product governance requirements
under Directive 2014/65/EU (MiFID II).
The main findings of the results are that while firms generally
define a target market for their products within the ESMA
guidelines on MiFID II product governance requirements, it is often
treated as a formalistic level and is done at an insufficiently
granular level with the use of unclearly defined terms.
ESMA also clarified that the definition of target market does
not necessarily provide a compatible distribution strategy that
enables the product to reach the identified target market.
ESMA also noted the following further areas for improvement:
- Firms to perform scenario analysis as required under Article
9(10) of the MiFID II Delegated Directive;
- Firms to perform a charging structure analysis as required
under Article 9(12) of the MiFID II Delegated Directive;
- Firms to review products (ESMA note that such reviews are not
always performed frequently enough and with an adequate scope to
verify if the financial instrument remains consistent with the
needs, characteristics and objectives of the target market);
- Firms to ensure that information is exchanged between
manufacturers and distributors.
Based on the results of the CSA, ESMA concluded that a review of
its guidelines on MiFID II product governance requirements was
required in order to address the most relevant areas where a lack
of convergence has emerged and to complement the guidelines with
relevant examples of good practices that emerged from the CSA. ESMA
also wish to align the guidelines to the revised MiFID II Delegated
Directive on the topic of sustainable finance and to the revised
MiFID II in the context of the Commission’s Capital Market
Recovery Package, and to incorporate the advice received from
ESMA’s Advisory Committee on Proportionality.
The ESMA public statement can be access
1.2 ESMA updates MiFID II Q&As on market
On 15 July 2022, ESMA published an updated version of its
Questions & Answers (Q&As) on market structures topics
under MiFID II and the Regulation (EU) 600/2014 (the Markets in
Financial Instruments Regulation or MiFIR). The updates include two
Q&As concerning algorithmic trading.
The first Q&A clarifies that orders that are executed
through functionalities which additionally to routing orders to
trading venues offer automated managing of the order should be in
the scope of the MiFID II definition of algorithmic trading. The
second Q&A clarifies that firms using third party systems
offering algorithmic trading functionalities are ultimately
responsible for compliance with the relevant requirements in
Article 17 of MiFID II.
On 23 September 2022, there was a further update to the Q&As
to clarify that trading venues may set instrument-level trading
hours for a specific sub-set of financial instruments (or for a
specific financial instrument) provided those trading hours are
made public and communicated to market participants.
A copy of the ESMA Q&A on MiFID II and MiFIR market
structure topics can be accessed
1.3 Implementing Regulation on format for third-country
firms and supervisors reporting under MiFID II is published in
On 15 July 2022, the European Commission published, in the
Official Journal of the European Union (OJ), Commission
Implementing Regulation (EU) 2022/1220 laying down implementing
technical standards (ITS) with regard to the format in which
branches of third-country firms and competent authorities have to
report information referred to in Article 41(3) and (4) of MiFID
The ITS will came into force on 4 August 2022, on the twentieth
day following its publication in the OJ.
A copy of the ITS can be accessed
1.4 ESMA updates MiFIR data reporting
On 19 July 2022, ESMA published its updated version of its
Questions & Answers (Q&As) on MiFIR data reporting. The
updates are included in a new Section 19 on reporting of emission
allowances under MiFIR.
The updated Q&As can be accessed
1.5 ESMA updates Q&As on MiFID II and MiFIR
On 5 September 2022, ESMA published updated Questions and
Answers (Q&As) on MiFID II and MiFIR transparency topics.
ESMA has amended Question 3 in Section 9 on third country issues
to clarify that transfers of financial instruments between two
branches of the same legal entity or between a branch and its
parent company are not subject to the transparency and transaction
A copy of the Q&As on MiFID II and MiFIR transparency topics
can be accessed
1.6 Public Register for the Trading Obligation for
derivatives under MiFIR
On 15 September 2022, ESMA published an updated Public Register
for the Trading Obligation for derivatives under MiFIR.
The update to Public Register has removed the USD LIBOR index
and the GBP LIBOR index from Table 1: Fixed-to-float single
currency interest rate swaps.
A copy of the Public Register can be accessed
1.7 ESMA publishes Final Guidelines on MiFID II
On 23 September 2022, ESMA published its Final Report on
Guidelines on certain aspects of the MiFID II suitability
The main amendments to the existing guidelines which were
published by ESMA in 2018 have been to address the introduction of
the obligation imposed on in-scope firms under Commission Delegated
Regulation (EU) 2021/1253 to consider the sustainability
preferences of clients when conducting their suitability
The Guidelines address the obligations to help clients
understand the concept of sustainability preferences, to collect
information from clients on their sustainability preferences, to
assess such sustainability preferences and identify suitable
products that fulfil the sustainability preferences of the client
and to provide training to staff on sustainability topics and keep
appropriate records of the sustainability preferences of each
client. The Guidelines also incorporate some good and poor
practices identified in ESMA’s 2020 CSA on suitability.
The Guidelines will be translated into the official languages of
the EU and published on ESMA’s website. The publication of the
translations will trigger a two-month period during which national
competent authorities must notify ESMA on whether they comply or
intend to comply with the Guidelines. The Guidelines will apply six
months after the date of the publication on ESMA’s website in
all EU official languages.
The Final Report containing the Guidelines is accessible
2.1 Minister for Finance signs into national law
finalised EU prudential rules for investment firms
On 5 July 2022, the Minister for Finance, Paschal Donohue,
signed three Statutory Instruments which amend the European Union
(Investment Firms) Regulations 2021 and the European Union (Markets
in Financial Instruments) Regulations 2017 which together transpose
Directive (EU) 2019/2034 (Investment Firms Directive or IFD) into
Irish law and give effect to Regulation (EU) 2019/2033 (the
Investment Firms Regulation or IFR). Together the regulations amend
the Central Bank Act, 1971 enabling Class 1 Firms to apply for
re-authorisation as credit institutions.
2.2 EBA and ESMA publish Joint Final Guidelines in
respect of the supervisory review and evaluation process
On 21 July 2022, the European Banking Authority (EBA) and ESMA
published joint final guidelines on common procedures and
methodologies for the supervisory review and evaluation process
(SREP) under IFD (SREP Guidelines). The SREP Guidelines set out
common process and criteria for the assessment of the main SREP
elements. The EBA also published the final draft Regulatory
Technical Standards (RTS) on Pillar 2 add-ons for investment firms
on that date (please see Section 2.3 below).
The SREP Guidelines are formed around the following main
elements; (i) business model analysis; (ii) assessment of internal
governance and investment firm-wide controls; (iii) risks to
capital and capital adequacy; and (iv) liquidity risk and liquidity
The SREP Guidelines incorporate a common scoring framework which
differentiates between specific risks and concerns in order to
allow for consistency and comparability. The procedures and
methodologies for SREP follow the principal of proportionality and
differ based on four distinct categories of investment firms.
A copy of the SREP Guidelines can be accessed
2.3 EBA final report setting out draft RTS on Pillar 2
add-ons for investment firms under IFD
On 21 July 2022, the EBA, in consultation with ESMA, published a
final report on draft regulatory standards (RTS) relating to Pillar
2 add-ons for investment firms under IFD. The EBA notes that
investment firms authorised under MiFID II vary greatly in terms of
size, business model, risk profile, complexity, and
interconnectedness. The draft RTS apply to class 2 and class 3
The RTS focus on the own funds requirement under Article
40(1)(a) of IFD where the investment firm is exposed to risks or
elements of risks, or poses risks to others that are material and
are not covered or sufficiently covered by minimum own funds. The
draft RTS propose several indicative qualitative measures which
will support competent authorities in their identification,
assessment, and quantification of material risks.
The draft RTS were developed in conjunction with the SREP
Guidelines (see above) to allow for consistent application by
competent authorities across the EU.
The EBA will submit the draft RTS to the European Commission for
endorsement before being published in the OJ.
A copy of the draft RTS can be accessed
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