Global Regulatory Brief: Trading and markets, May edition

The Global Regulatory Brief provides monthly insights from regulatory bodies on developments within risk and regulation. This brief was written by Bloomberg’s Regulatory Affairs Specialists.

Trading and markets regulatory developments

After over a year of debate on Europe’s landmark trading and investment rules, the final discussions on the MiFIR-D review have begun. The discussions will bring clarity to a number of relevant issues such as cost of market data. Meanwhile a number of global regulatory updates are ongoing, listed below. Navigate the regulatory challenges that are reshaping financial markets with confidence.

• Final negotiations on the MiFIR-D review begin
• Qatar to introduce options, futures in new derivatives exchange
• US Department of Justice raises antitrust concerns over SEC equity market structure proposals
• HMT extends pension funds and intragroup clearing exemptions under UK EMIR
• UK launches call for evidence on Senior Managers and Certification Regime review
• SEC reopens comment period for proposals on Exchange Act Rule 3b-16 and provides supplemental information
• CFTC staff announces revisions to Part 43 bock and cap sizes
• Hong Kong SFC offers guidance on managing risk in trading activities

Final negotiations on the MiFIR-D review begin

The final discussions between the European Commission, European Parliament, and Council (‘trilogues’) on the MiFIR-D review have begun. This follows more than a year worth of debate and discussion within the various institutions to arrive at their own respective negotiating position on the changes to Europe’s landmark trading and investment rules. The trilogue discussion has so far centered on the changes to the consolidated tape regime and the issues around payment for order flow (PFOF). Many of the relevant issues such as transparency calibration, the cost of market data, and the nature of the consolidated tape tender process will be fleshed out by the European Securities and Markets Authority (ESMA) in due course following the finalization of the legislative text. Subsequent trilogue meetings are scheduled for May and June, with a final agreement expected by the summer.   

In parallel, ESMA has published the third edition of its data quality report which includes for the first time analysis of MiFIR transaction data from authorized reporting mechanisms (ARMs) and approved publication arrangements (APAs).

Qatar to introduce options, futures in new derivatives exchange

The Qatar Financial Centre Regulatory Authority (QFCRA) announced that it has developed and issued a new regulatory framework for listed derivatives. The Derivatives Markets and Exchanges Rules 2023 (“DMEX”) was launched following an extensive three-month public consultation with investors and market participants. The launch of DMEX means that the regulatory framework is now in place in the QFC to allow for the establishment of a derivatives exchange and also a Central Clearing Counterparty to ensure efficient settlement of trades and management of settlement risk.

US Department of Justice raises antitrust concerns over SEC equity market structure proposals

In a letter to the SEC, the US Department of Justice (DOJ) expressed its views on the SEC’s four proposed rules on: 1) the disclosure of order execution information (Rule 605 Proposal); 2) setting minimum pricing increments, access fees, and transparency requirements (Regulation NMS Proposal); 3) competition for certain orders (Order Competition Proposal); and 4) setting forth best execution requirements for certain market participants (Best Execution Proposal). The Antitrust Division of the DOJ commended the SEC for its efforts but also urged the Commission to carefully consider potential interactions among the proposed rules, plan for implementation timelines, and evaluate the impacts of the rules. In particular, the letter urged the SEC to ensure that the final rules, taken together, preserve the benefits to competition identified by the Commission in each of the rule proposals.

HMT extends pension funds and intragroup clearing exemptions under UK EMIR

HMT has announced its intention to extend the timeframes for two exemptions under the UK European Market Infrastructure Regulation (EMIR). Specifically, the UK plans to extend the exemption for pension funds from the clearing obligation by two years until June 18, 2025. In the meantime, HMT will review the pension fund exemption in conjunction with the UK regulators. Further, HMT will extend the temporary intragroup exemption regime by a further three years to December 31, 2026 as the government considers further reform in this area. The Government intends to confirm these extensions into UK law over the next few months.

UK launches call for evidence on Senior Managers and Certification Regime review

HM Treasury (HMT) has launched a call for evidence on the Senior Managers and Certification Regime (SM&CR) to guide future reform to the regime first introduced following the global financial crisis to improve the culture of the financial services sector. Among other things, HM Treasury’s call for evidence seeks feedback on whether the current regime delivers against its original aims, whether there are any specific areas of the SM&CR that respondents have concerns about or that might act as a deterrent to business locating in the UK, and the regime’s scope. HMT will work with the UK financial regulators to ensure that the legislative changes align with operational considerations. Indeed, the PRA and FCA published in parallel a discussion paper on the effectiveness, scope, and proportionality of the regulatory regime.

The review of the SM&CR comes as part of the UK Government’s “Edinburgh Reforms” designed to bolster the UK’s status as a global center for financial services. Comments are due by May 29, 2023.

SEC reopens comment period for proposals on Exchange Act Rule 3b-16 and provides supplemental information

The SEC reopened the comment period and provided supplemental information on proposed amendments to the definition of “exchange” under Exchange Act Rule 3b-16. The Commission initially proposed the amendments in Jan. 2022 and reopened the comment period in May 2022. The reopened comment period closed on June 13, 2022. The reopening release reiterated the applicability of existing rules to platforms that trade crypto asset securities, including so-called “DeFi” systems, and provides supplemental information and economic analysis for systems that would be included in the new, proposed exchange definition. The reopening release also requested information and public comment on crypto asset securities trading on such systems and certain aspects of the proposed amendments applicable to all securities. The public comment period will remain open for 30 days after publication of the reopening release in the Federal Register.

CFTC staff announces revisions to Part 43 bock and cap sizes

The CFTC published revised post-initial appropriate minimum block sizes determined under Regulation 43.6(g) and revised post-initial cap sizes determined under Regulation 43.4(h). The revised post-initial block and cap sizes, as well as other swap reporting rules, forms, and requirements, are on the CFTC’s website.

Hong Kong SFC offers guidance on managing risk in trading activities

Hong Kong’s Securities and Futures Commission (SFC) has issued a new report offering guidance to licensed corporations (LCs) to help them cope with evolving risks amid market uncertainty. The guidance is the result of a thematic review to assess the risk management practices across operational risk, remote booking, and data risk management. The SFC expects LCs to have sound risk governance frameworks in place with clearly defined responsibilities and accountabilities of senior management as well as appropriate protocols.

View the additional regulatory briefs from this month:

• Risk, capital and financial stability
• Green finance
• Digital finance

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