MiFID II and PRIIPs: AMAFI at the European Parliament
As part of ongoing negotiations on the Retail Investment Strategy (RIS) at the European Parliament's ECON Committee, AMAFI Chairman Stéphane Giordano and several members of the European Action Committee met with MEP Stéphanie Yon-Courtin, rapporteur for the RIS.
On the MiFID II review, AMAFI stressed the following issues:
On the PRIIPs review, AMAFI said that it broadly opposed the European Commission's proposals (AMAFI / 23-64), which Ms Yon-Courtin took up in her draft report, and called for greater regulatory stability. It also stressed the need for consumer tests to make sure that the new transparency obligations are truly beneficial to customers, while emphasizing that plain vanilla products should be excluded from the scope of PRIIPs.
AMAFI also broached RIS-related topics with the policy advisor of the Progressive Alliance of Socialists and Democrats (S&D), and with the office of Finnish MEP Eero Heinäluoma, who represents the S&D Alliance on the ECON Committee negotiating team.
Plain vanilla products
Acting alongside other members of the European Forum of Securities Associations (EFSA), AMAFI wrote to the European Commission and ESMA protesting the undue regulatory barriers hindering the distribution of plain vanilla shares and bonds to retail customers, at a time when the European institutions want to make it easier for these investors to access financial markets.
In their response, the European authorities merely encouraged the associations to submit their points as part of the ongoing work on the RIS, which is what AMAFI has already endeavoured to do through its efforts to convey this message to national authorities and members of the European Parliament. We were therefore pleased that Ms Yon Courtin presented an amendment to the ECON Committee proposing to exempt all non-packaged financial instruments – including plain vanilla shares and bonds – from product governance obligations.
MiFIR - Exemption from the trading obligation
As part of the review of the Markets in Financial Instruments Regulation (MIFIR), due to come into force at the end of first-quarter 2024, the European Commission would be entitled to grant a trading obligation exemption for certain derivatives (including the most liquid swaps and credit default swaps) on multilateral trading facilities in the European Union or equivalent facilities in third countries. Exemptions would be granted in certain circumstances, based on information sent by institutions to their competent authorities.
AMAFI reached an agreement with the Commission that exemption applications could be reviewed before MIFIR comes into force, so that exemptions could be effective from that date. AMAFI is therefore working with the French securities regulator, AMF, and the European Commission to establish the content of the applications that will enable institutions to be covered by the exemption.
This is a key issue for the competitive performance of institutions in France and the rest of the EU in these products. The exemption will shape their ability to propose cost-effective solutions to customers outside the EU, insofar as the trading obligation created an unfair playing field that severely eroded their market shares.
EMIR 3.0
It is not known at this stage when EMIR 3.0, Europe's new derivatives regulation, will come into effect. However, AMAFI and other Paris-based associations believe that national and European supervisory authorities should be asked to extend the current exemption for equity options clearing to that date. Currently, under EMIR regulatory technical standards, European market participants are covered by a temporary exemption, set to expire on 4 January 2024, from the requirement to post bilateral margin (variable and initial) for equity options.
In early November, AMAFI, the FBF, the AFG and Paris Europlace wrote to the AMF and the ACPR asking them to make a request to the European authorities to extend the exemption. That outcome is likely under EMIR 3.0: the co-legislators are agreed on extending the derogation for an unspecified duration, while non-EU jurisdictions – including the United States and the United Kingdom – do not apply such a requirement.
A new model for Euronext markets
After acquiring the Italian stock exchange in 2021, Euronext decided to switch its cash and derivatives clearing to the Italian clearing house, previously part of Borsa Italiana. The change has been effective for cash markets since 27 November 2023; derivatives markets will follow suit next May.
AMAFI was delighted by the constructive dialogue that took place between Euronext and its members, which paved the way for the successful execution of a highly complex project.
T+1
The United States and Canada have decided to shorten the securities settlement cycle to one day (T+1). Starting in April 2024, trades will be settled one day after trading instead of the two-day period that is currently the standard internationally, except for a few Asian platforms. The aim is to make the markets more attractive and less risky.
The United Kingdom and the European Union are also in talks to determine whether to align with the T+1 cycle. AMAFI, the AFG and France Post-Marché are currently conducting a joint investigation of this topic, focusing on the effects of the North American switch on the operation of European markets; and the pros and cons of adopting such a scheme in Europe.
It is important to stress that at this stage of the investigation, and setting aside the interest of adopting the same standards as those used by the main global markets, the technical drawbacks appear to outweigh the benefits. As things stand, unlike highly integrated non-EU markets, Europe’s post-trade segment is highly fragmented, making a reform of this kind extremely hard to execute. However, the US switch to T+1 – and, more importantly, the possibility that the UK may follow suit – seems likely to affect EU markets.
MiFID II and PRIIPs: AMAFI at the European Parliament
As part of ongoing negotiations on the Retail Investment Strategy (RIS) at the European Parliament's ECON Committee, AMAFI Chairman Stéphane Giordano and several members of the European Action Committee met with MEP Stéphanie Yon-Courtin, rapporteur for the RIS.
On the MiFID II review, AMAFI stressed the following issues:
On the PRIIPs review, AMAFI said that it broadly opposed the European Commission's proposals (AMAFI / 23-64), which Ms Yon-Courtin took up in her draft report, and called for greater regulatory stability. It also stressed the need for consumer tests to make sure that the new transparency obligations are truly beneficial to customers, while emphasizing that plain vanilla products should be excluded from the scope of PRIIPs.
AMAFI also broached RIS-related topics with the policy advisor of the Progressive Alliance of Socialists and Democrats (S&D), and with the office of Finnish MEP Eero Heinäluoma, who represents the S&D Alliance on the ECON Committee negotiating team.
Plain vanilla products
Acting alongside other members of the European Forum of Securities Associations (EFSA), AMAFI wrote to the European Commission and ESMA protesting the undue regulatory barriers hindering the distribution of plain vanilla shares and bonds to retail customers, at a time when the European institutions want to make it easier for these investors to access financial markets.
In their response, the European authorities merely encouraged the associations to submit their points as part of the ongoing work on the RIS, which is what AMAFI has already endeavoured to do through its efforts to convey this message to national authorities and members of the European Parliament. We were therefore pleased that Ms Yon Courtin presented an amendment to the ECON Committee proposing to exempt all non-packaged financial instruments – including plain vanilla shares and bonds – from product governance obligations.
The Union has aimed to develop more integrated and deeper EU capital markets since the launch of the CMU in 2015. AMAFI has supported this initiative from the outset, stressing its importance for the financing of the EU economy. Although some progress has been made in the nine years since the adoption of the first CMU Action Plan and its revamping three years ago, there is still a need for deeper and more competitive capital markets. These should be capable of contributing to the EU’s prosperity by meeting a larger share of its massive financing needs arising from the green transition, the digital revolution, and the ageing of the population. This issue is even more critical given the dramatic change in the geopolitical and economic context, calling for the development of the open strategic autonomy of the EU.
When it comes to financial markets, the priority of the upcoming European Commission should therefore be to actually develop the financial markets of the Union, taking stock of the fact that the harmonisation of legislation that has governed public action since 2015 was an important but insufficient step towards achieving this objective. What is needed is not a new CMU action plan, but rather a fundamental change of approach, as proposed by ECB President Christine Lagarde in her speech to the European Banking Congress in November 2023.
The definition of the upcoming European Commission’s agenda is a unique opportunity to position the EU in the global race for competitiveness as it may be too late already. AMAFI is willing to contribute to this reflection by proposing what it considers to be key priorities to enable financial markets to play their fair share in the prosperity of the Union.
