Main market initiatives

Main market initiatives - General Overview







EU Fund Management 22 July 2013 Download 


EU Fund Management UCITS IV - 1 July 2011 Download 


EU Fund Management 18 march 2016 Download 


EU Fund Management 2007 Download 
MIF II EU Sales, Negotiation, Fund and management 3 January 2018 Download 

Short Selling Regulation


Negotiation and Clearing

1 November 2012



EU Fund Management 22 july 2013


EU Sales 1 January 2018




1 January 2016



EU Clearing 16 August 2012 Download 




Begin in 4 waves
(June 2015 to February 2017)



UE Settlement 1 january 2015 Download 


EU Settlement 17 september 2014 Download

Legal Entity Identification (LEI)

USA & EU Codification ? Download 


FR Taxation 1 August 2012 Download 
FATCA USA Taxation

1 July 2014 (WHT US Income)
15 March 2015 (first reports)
1 January 2017 (WHT other US flows)



USA Clearing 21 July 2010 Download 

Shadow Banking

USA & UE Fund Management Not yet set Download 

Money market funds

UE Fund Management Not yet set Download 

Europ.Long-Term Invest.Funds (ELTIFs)

UE Fund Management  9 december 2015 Download 
Collateral directive

UE Clearing / Settlement 27 june 02 Download 
Finality directive

UE Clearing / Settlement 11 june 98 Download 
Recovery and Resolution

UE Market safety Not yet set Download 
Securities Financing Transactions UE Market transparency Not yet set Download 
Shareholders rights UE Market transparency not set yet Download 
Institutions for Occupational Retirement Provision (IORP) UE   not set yet Download 

Institutions for Occupational Retirement Provision (IORP)

Reference enactments : Directive 2016/2341 (IORPII) concerning the activities and monitoring of the Institutions for Occupational Retirement Provisions (IORP). It reviews the current directive (2003/41/EC) on retirement schemes.

IORP = Institutions for Occupational Retirement Provision


  • 27 March 2014: In response to “Call for Advice” from EIOPA1, the European Commission adopted a legislative project2 aiming at establishing new regulations on Institutions for Occupational Retirement Provision (IORP). This meant reviewing Directive 2003/41/EC with the aim of improving the governance and transparency of these institutions in Europe, as well as promoting cross-border activities and long-term investment.
  • 17 September 2014: An initial agreement3 to the project was proposed during the Italian presidency of the Council of the European Union; followed by a second4 in October and a third5 and fourth agreement6 in November.
  • 28 November 2014: A revised version of the fourth agreement7 was published, at the same time as a review mandate8.
  • 10 December 2014: On behalf of the Council, the Committee of EU permanent representatives agreed to a negotiation phase9 for a proposed Directive IORP II, opening the negotiations with the Parliament to have the Directive adopted.
  • 28 May 2015: Following adoption of a draft opinion10 in February, the economic affairs commission, EMPL, voted and adopted its amendments to the proposed Directive11.
  • 25 January 2016 : The Economic Affairs Committee (ECON) of the European Parliament approved IORP II (47 pros against 3).
  • 29 Feb, 15 March 13 April and 4 May 2016: Tripartite negotiation (Trilogue) between Parliament representatives, the Council and the Commission.
  • 10 May 2016: Vote in plenary session.
  • 30 June 2016: The European Parliament, the Council and the Commission have agreed on a proposal for a revised Directive on occupational pension funds, known as IORP2.
  • 27 July 2016: The EC launches a public consultation on personal (or private) pensions open until 31 October 2016.
  • 24 November 2016: The final text has been approved by the European Parliament.

Next step: The text published in the Official Journal of the EU on 23 December 2016 enters into force on 13 January 2017, but is only applicable as from 13 January 2019. European Member States have 24 months (until 13 January 2019) to transpose this directive into domestic legislation.


Retirement schemes in Europe are generally both very complex and varied. They are the result of the history of social dialogue within each country, and are based on three pillars:

The first is constituted by the public pension schemes linked to revenues,

The second are private schemes of an occupational nature,

The third incorporates retirement schemes of an individual nature.

If the first pillar is suposed to remain the most important pension system, the EC observes that most member states in the EU have set up reforms to explore alternatives.

What is this Directive trying to do?

Two major reasons can be seen in the wish of the Commission to review the current IORP regime:

  1. The need for transparency with regard to information provided to members and beneficiaries of IORPs.
  2. The intention to facilitate the cross-border development of pension schemes and the importance of harmonising the various European pension systems.

This necessity of transparency is expressed by an obligation to provide details of the investments and new information reports to the members and beneficiaries of the IORPs. And for the IORPs, the necessity to develop new monitoring tools and the obligation to set up appropriate and detailed risk management.

What will be the impacts?

If we look at the regulatory text, there is this obligation for a pension fund to appoint a depository which will have a custody and safekeeping role for the Fund assets. This depository bank may be located in a country other than the one where the fund is set up. The pension fund (Anglo-Saxon origin), is an investment fund dedicated to capitalisation pension schemes.

In Luxembourg, the European leader for domiciliation and administration of investment funds with more than €3,000 billion of net assets, pension funds regulation has been in place since 1999. Updated in 2003, it implies that any pension fund must have a depository for the custody of its assets and also an asset and liabilities manager. Luxembourg has today 15 pension funds, entities endowed with a legal entity and intended to cover the services relating to retirement as well as additional services in the event of death and disability. The Luxembourg market currently offers a choice of structures which are particularly suitable for multinational companies and expatriate workers:

  • a company structure where the beneficiaries are also shareholders in the company - the pension savings company with a variable capital (SEPCAV). When a member retires, the income from the contributions invested will be repaid in the form of a capital sum.
  • an associative structure whose aim is to guarantee the payment of pensions determined by pension regulation - the Pension Savings Association (ASSEP). This undertakes to pay annuities or capital sums to the members who are the fund's creditors.

These two legal structures are monitored by the Luxembourg regulator (the CSSF).

  • And the "CAA fund", a pension fund subject to supervisory review by the Commissariat aux Assurances (The Luxembourg Insurance Authority),

With this Directive, pension funds should set up controls and issue additional information for the Regulators. Banks have the expertise as they provide fund administration and custody services within the scope of the current AIFM and UCITS V Directives.

What might be the obstacles of this Directive?

It is too soon to know as of today what the practical consequences will be in each European country to this proposed Directive, whose transposition is scheduled for 13 January 2019.

Pitfalls are many and common rules must be set up on a number of complex subjects, such as:

  1. how pillars 2 and 3 work in the various European countries;
  2. the supervisory powers (eligibility and monitoring of the IORPs);
  3. requirements in governance and risk management;
  4. the method of communication with members, with a clear and understandable information system.

The European Commission has an interest in encouraging cross-border pensions. IORP II has added some revisions in the area of cross-border pensions, including clarifications to the roles of home and host country regulators, information requirements and transfers between IORPs.

IORP II represents an outcome and a step to encourage cross-border pensions.

In parallel, initiatives at EIPOA level

On its own initiative, EIPOA decided to carry out an analysis for the EC in order to facilitate the technical expertise on the solvency rules for IORP. The outcome of this work has been provided by EIOPA on 26 January 2016. It came out a resistance to market stress in the long run.

Brexit impact

The extent to which IORP II will apply to the UK will depend how and when Brexit occurs. But it might appear that the Directive now holds no interest to the U.K. It is also unclear whether the resignation of Commissioner Lord Jonathan Hill, whose Directorate is responsible for this Directive, might lead to futher developments.

New pan-European label- PEPP

In parallel of this Directive the Commission launched on 29 June 2017 a new class of pension products, the PEPP (pan-european personal pension). This proposal is accompanied by a  Recommendation on the tax treatment to grant the same tax treatment to PEPPs as is currently granted to similar existing national products. After discussion with the Parliament and the Council and once adopted, this Regulation wil enter into force 20 days after its publication in the OJ of the EU.

SGSS/DIR/SMI contact:
Jean-Pierre GOMEZ


1 May be consulted on: https://eiopa.europa.eu/Publications/Requests%20for%20advice/20110409-CfA-IORPII-final.pdf

2 May be consulted on: http://eur-lex.europa.eu/resource.html?uri=cellar:33cb1b95-b6c8-11e3-86f9-01aa75ed71a1.0002.01/DOC_1&format=PDF

3 May be consulted on: http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%2013278%202014%20INIT

4 May be consulted on: http://data.consilium.europa.eu/doc/document/ST-14643-2014-INIT/en/pdf

5 May be consulted on: http://data.consilium.europa.eu/doc/document/ST-15207-2014-INIT/en/pdf

6 May be consulted on: http://data.consilium.europa.eu/doc/document/ST-15901-2014-INIT/en/pdf

7 May be consulted on: http://data.consilium.europa.eu/doc/document/ST-15901-2014-REV-2/en/pdf

8 May be consulted on: data.consilium.europa.eu/doc/document/ST-16620-2014-IN IT/en/pdf

9 May be consulted on: http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/146148.pdf

10 May be consulted on: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+COMPARL+PE-541.293+01+DOC+PDF+V0//EN&language=EN

11 May be consulted on: http://www.europarl.europa.eu/meetdocs/2014_2019/documents/empl/dv/1062/1062627/1062627en.pdf

AIFM Directive

Reference Text: European Directive 2011/61/EU on alternative investment fund managers 


The AIFM (Alternative Investment Fund Manager) Directive has the objective of regulating the alternative investment fund managers that manage and/or market these funds and not the funds themselves, considering the extreme heterogeneity of this type of fund. In fact all funds not subject to the UCITS Directive and managed within the EU, irrespective of their country of domiciliation, are considered alternative investment funds by the AIFM Directive, along with all alternative investment funds domiciled and managed outside of the EU and sold on EU territory. In particular, hedge funds, investment capital funds and real estate funds, with or without leverage, closed or open, fall within the scope of the AIFM. It should be noted that the passport granted by the Directive only allows marketing within the EU for investors that are at least professionals (in reference to the terminology of the MiFID) and therefore not for the broad population of individual investors targeted by the marketing of UCITS funds.

With an objective of harmonisation, the Directive lists the various conditions for approval in terms of minimum level of equity, competence and good character of the directors, management of conflicts of interest, organisation of controls, delegation of duties to third parties, use of leverage funds, etc.

The Directive creates a passport for European fund managers will be effective as of the application date in 2013 and extended to non EU fund managers in 2015.

Furthermore, for each fund managed by a fund manager, this fund manager, like with UCITS funds, must mandate a depositary who must be subject to a supervisory authority. For the first time at European level, however, the Directive clearly establishes the principle of liability of the depositary with regard to the fund managed in the event of loss of the assets under management, thus obliging the custodian to return identical assets or the cash value of these assets to the fund managed, with the exception of an external event beyond reasonable control; the conditions for exoneration will be specified in the level 2 measures: in the current proposal, the European Commission would tend towards stronger responsibility of the depositary in the event of loss of assets due to fraud/bankruptcy of a sub-custodian unless local insolvency law does not recognize the effects of the segregation of assets.

At the same time, based on the current proposal, due diligence at the sub-custodian level will be reinforced specifically requiring the depositary to inform the fund manager of any risks which might impact assets held abroad. In addition, if, for reasons of the applicable law, including the law relating to property or insolvency, the segregation of the assets cannot be achieved, the depositary should  take additional measures to minimise the risk of loss and maintain an adequate level of protection of the assets held by the sub-custodian.

Current Situation

  • 19/12/2012: Publication of the Level 2 measures
  • 1st Quarter 2013: Adoption of the Level 2 measures
  • February 2013: Publication of ESMA guidelines on remuneration
  • 2 April 2013: Publication of ESMA technical standards and guidelines on types of AIFM and.AIF definition
  • 16.05.2013: Implementing regulation (opt-in procedure) + Implementing regulation (definition of the Member State of reference)
  • 24.05.2013: Publication of ESMA guidelines on AIFMD key concepts (AIF definition)
  • 22.07/2013: Entry into application (deadline for transposition)
  • 01.10.2013: Publication of ESMA guidelines on reporting obligations

Next Step

  • July 2014: deadline for (existing) AIFM to be compliant with AIFMD
  • 2015: Management and marketing Passport (subject to adoption by the Commission) for non-EU AIFM and/or marketing of non EU-AIF
  • 2018: End of private placement regime (subject to adoption by the Commission)

Virginie Amoyel-Arpino

UCITS I-IV Directive

Reference document: Directive 2009/65/EC of 13 July 2009 (UCITS IV Directive).

UCITS IV implementation date (transposition by Member States: 1 July 2011)


The UCITS (Undertakings for Collective Investments in Transferable Securities) Directive, of which the first version – UCITS I – dates back to 1985, generally aims to increase the efficiency of the single market by facilitating the free movement of UCITS within the EU, provided they conform with a set of common coordination rules concerning aspects such as investor access, eligible financial instruments and risk spreading. The UCITS which comply with the rules of this Directive are said to be coordinated and may market their units in any EU Member State, simply by notifying the particular state, without the need to request a new authorisation in each country where the funds are marketed. The latest published version of this Directive is the UCITS IV Directive which officially came into effect on 01/07/2011. The main measures enforced by the UCITS IV Directive aimed to:

  • improve or correct existing UCITS III measures: such is the case for the simplification of the cross-border notification procedure, the replacement of the non EU-standardised simplified prospectus by a standardised document (the Key Investor Information Document – KIID), and the set-up of a real passport for asset management companies,
  • increase the competitiveness of European asset management by striving to increase the average size of funds in order to promote economies of scale: this concerns cross-boarder master-feeder structures and the measures allowing the cross-boarder merger of funds.

It is also to be noted that UCITS IV calls for much stronger coordination and communication between the Member States' supervisory authorities. This coordination has been facilitated by the creation of a new European supervisory body – ESMA – at the beginning of 2011. The cross-border notification period applicable to coordinated UCITS has thus been reduced from a maximum of 2 months under UCITS III to 10 business day under UCITS IV.

Current situation

The UCITS IV Directive came into effect on 1st July 2011 in the Member States but in many cases its transposition was slightly offset (only 5 countries managed to meet the transposition deadline).

Upcoming stages

The European Commission  is set to adopt a proposal for a UCITS V Directive aimed at reviewing specific aspects of Directive 2009/65/EC (UCITS IV) by introducing harmonised provisions on the functions of depositaries (planned alignment with the AIFM Directive except concerning the possible contractual transfer of the depositary's responsibility to a sub-custodian, which is not provided for in the future UCITS V text), the manager compensation policies and the penalties applicable to managers (see UCITS V project brief)

SGSS/SMI contact
Virginie Amoyel-Arpino
Alain Rocher

UCITS V Directive

Reference document: Directive 2014/91/EU of 23 July 2014 amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions.


On 3 July 2012, the European Commission published a legislative package aimed at improving consumer protection in financial services. This package consists of three legislative proposals: a proposal for a key information regulation concerning packaged retail investment products (PRIPs), a revision of the Insurance Mediation Directive (IMD) and a proposal for a Directive revising the UCITS IV Directive by integrating provisions on depositaries, manager remuneration and sanctions (UCITS V)

Concerning the provisions relating to depositaries in UCITS V, the following is to be noted: except for a few divergences (listed below), this proposal is a word-for -word copy of level 1 of the AIFM Directive. This practically identical reproduction of the alternative funds Directive confirms the European Commission's wish to harmonize, in a broad and precise way, the functions of depositaries in Europe.

Alignment with the AIFM Directive:

  • Appointment of the depositary
  • Depositary’s duties functions: cash monitoring, custody/Recordkeeping, oversight duties
  • Delegation rules (see divergences below)
  • Liability regime (see divergences below)

Divergence with the AIFM Directive:

  • Liability of the depository for improper performance of its oversight duties in case of loss (or loss of value) if for example the depositary fails to act on investments that are not compliant with fund rules
  • Delegation of custody to entities acting as CSDs
  • Reuse: Ban of reuse of assets held in custody by the depository or by any third party to whom custody has been delegated for their own account
  • European harmonization of insolvency law effects on assets held in custody: each Member State must ensure that its insolvency law protects assets under custody in the event of bankruptcy of the depositary by whom the assets are in custody or its sub-custodian located in the EU
  • Delegation conditions (level 2): the depositary has to ensure that its sub-custodian has taken all necessary steps to ensure that in the event of insolvency of the third party, assets of a UCITS held by the third party in custody are unavailable for distribution among or realisation for the benefit of creditors of the third party
  • Liability regime: no contractual transfer of liability to a sub-custodian
  • Eligible entities to act as depositary + addition 24 month-period granted to existing managers to appoint a depositary complying with the eligibility’s criteria
  • Conditions for fulfilling the independence requirement (level 2)
  • Information related to the list of our sub-custodians and their delegates

Past steps:

The Commission's aim is to reduce regulatory obstacles to cross-border distribution of investment funds, notably by :

  • improving transparency with regard to the legal and administrative requirements (notification, marketing material, local support to investors, etc.) requested by the European Union and
  • Member States in this area as well as fees charged by national authorities
  • guaranteeing more consistency in the method of calculating these costs
  • proposing a harmonized definition of pre-marketing
  • specifying the administrative requirements imposed by the national authorities

The Commission expects from these measures a simplication of the procedures for distribution of funds as well as a reduction of induced costs, and correlatively an increase in the cross-border distribution of the latter.

Next step:

This draft text will be examined by the European Parliament and the Council. Knowing that the texts provide for a transposition of the amended directive 24 months after its publication.

SGSS/DIR/SMI contact:
Marie-Claire de Saint-Exupéry


Reference document: Directive 2004/39/EC (MiFID)

Applicability date

1 November 2007


The "Markets in Financial Instruments Directive" (MiFID) 2004/39/EC was adopted on 21 April 2004 and came into force on 1 November 2007.

  • It creates a single European financial services market enabling financial investment services providers (ISPs) approved by the Member States to operate across the EU (under a European passport);
  • It repeals the rule of order centralisation on regulated markets, by ending the monopoly of Incumbent Exchanges with the arrival of  Multilateral Trading Facilities (MTFs) and allowing the internalisation of orders on the intermediary's own account;
  • It lays down organisational requirements and rules of conduct to prevent conflicts of interest and improve investor protection through measures such as the obligation to execute the orders under the most favourable conditions for the client (best execution) and pre- and post-trade transparency rules (however, the pre-trade transparency rules only apply to shares admitted to trading on a regulated market).

Moreover, MiFID reinforced the investment services providers' classification and client information obligations, considering that the clients with the least experience require the highest protection level. Three classes of clients have been defined: eligible counterparties (banks and financial institutions), professionals (companies) and non-professionals (private individuals).

Concerning the transparency obligation, it should be noted that the MiFID implementing regulation defined four types of derogations:

  • in the event of execution based on a price borrowed from other platforms (imported price);
  • in the event of large orders;
  • in the event of negotiated transactions;
  • when the orders are placed in an order management system before their transmission to the market

These derogations have given rise to crossing networks and other dark pools which have led market authorities to propose a review of MiFID.

Current situation

This Directive will be replaced with MiFID 2 (see corresponding factsheet)

SGSS/SMI contact
Alain Rocher


Reference documents:

  • Directive 2014/65/EU of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC (insurance mediation) and directive 2011/61/EU (AIFMD) EUOJ L 173/349 12/6/2014
  • Regulation 600/2014 of 15 May 2014 on markets in financial instruments and amending Regulation 648/2012 (EMIR) EUOJ L 173/84 12/6/2014









Entry into force: 2/07/2014 (level 1)

Entry into application: 3/01/2018


The proposed texts are a revision of the Markets in Financial Instruments Directive (MiFID), which came into force in November 2007. After 3 and half years of implementation, this update had been expected, especially since the current MiFID had given rise to various interpretations in its transposition into national laws, resulting in over-regulation in certain Member States.

Moreover, the Commission wanted to adapt the Directive to the changes having taken place in the financial markets over recent years: new trading venues, new products, innovations stemming from technological developments such as high-frequency trading.

It also wanted to draw the lessons from the 2008 financial crisis and integrate the recommendations made by the G20 in Pittsburgh in September 2009 concerning the need to improve the transparency and surveillance of certain markets, which were less regulated at the time, such as OTC derivatives markets.

As a reminder, the initial version of MiFID laid down a regulatory framework for the provision of investment services to investors (such as brokerage, consulting, trading, portfolio management, underwriting, etc.) by banks and investment companies (investment service providers), but also for the operation of regulated markets, in particular equity markets, by market operators. It also aimed to promote and control the provision of cross-border investment services via the granting of a European passport to investment companies, enabling them to provide their services across the EU either through the free provision of services or through the set-up of a branch. Another significant provision – the rule concerning the concentration of orders on a particular regulated market – authorises investment companies to choose their preferred trading venue(s), in particular the one enabling them to offer their clients the best execution guarantee.

The proposed revision consists of a Regulation (MiFIR) which will be applicable directly and "as is" in the Member States, and a Directive (MiFID II) which will require transposition in the Member States.

The 2 texts (the Directive and the Regulation) must be read jointly as they jointly form the legal framework governing the requirements applicable to Investment Companies (ICs), Regulated Markets (RMs) and providers of data reporting services.

For more information please refer the European Parliament (Legislative Observatory); links are indicated in the Link paragraph of this document

Current Situation:

  • Entry into application

MIF II has entered into application on the 3rd of January 2018 (one year delay). The operational launch went well.

  • Transposition of the level 1 & level 2

Member States had until the 3rd July 2017 to transpose the level 1 and level 2 Directives (due to the one year delay). French regulators decided to maintain the momentum. The level 1 has been transposed (publication in the French JO on the 23rd of June) except for the Title VI (Competent Authorities) for which a specific mandate was required (is included in the Loi Sapin2). The transposition in the local regulation has been achieved. Now asset managers ruled by AIFMD or UCITS are no more considered as Investment Firms but remain submitted to parts of MIFID2 requirements. In November 2017, the AMF has started its cleaning process (negative transposition). It has to remove from the French texts requirements that are in the EU regulations. To be noted the transposition was not done at the end of 2017 in some countries.

The French regulator (AMF) has start a process of reviewing its policy in the context of MIF II. This will be done in a new format (as of today the policy was disseminated in a variety of formats, including guides, Q&As, positions, guidelines, news releases and annual reports…).

  • Level 3

Level 3 is made of Q&A and Guidelines.

Several Q&A have already been issued and could be amended / completed (the latest one is dated 28th of April and is about transparency):

  • Investor protection (including costs and charges)
  • Transparency and market structure
  • Systematic internalisers
  • CFD and other speculative products
  • Commodity derivatives

ESMA has issued (shall issue) several guidelines amongst them those on:

  • transaction reporting, record keeping
  • product governance
  • suitability (to be issued)Other points
  • ESMA has launched its Financial Instruments Reference Data System (FIRDS) on the 16th of October 2017
  • Other work undertaken by ESMA

ESMA has launched its Financial Instruments Reference Data System (FIRDS) on the 16th of October 2017

In its workplan for 2018, ESMA foresees to continue its work on different topics in relation to MIF II such as:

  • Standards for determining which derivatives are TOTV only (traded on a trading venue)
  • Tick size for systematic internalisers quotes
  • Production of different reports

Also for 2018, since MIF II is now live, ESMA intends to start supervising the effective implementation of MIFID2/MIFIR. For example, on:

  • The investor protection
  • The supervisory convergence on pre-trade transparency, position limits, commodity derivatives, third countries trading venues, …)
  • In addition, ESMA has launched its interactive single rulebook (all the MIF II texts will be available via this tool).
  • On the industry’s side

As an answer to the requirements as regards product governance and costs and charges, the industry (through several associations) has established a pan-European model to be used for the description of target markets (called EMT). Several initiatives from the industry (for example RegXchange) are appearing with the aim to connect manufacturers with distributors.

The industry has reached an agreement on how to deal with the ban of inducement in case of funds.

Main steps:

  • Level 1

The level 1 is made of two texts: a directive (MIFID2) and a regulation (MIFIR) and has entered into force on the 2nd of July 2014.

Main milestones:

  • Publication of both EP reports (from Markus Ferber) on 16 March 2012 (MIFID II) and 27 March 2012 (MIFIR)
  • Vote in ECON on 26 September 2012
  • Vote in plenary on 26 October 2012 (no legislative resolution has been voter in order to let some latitude to the negotiations with the Council and the Commission (Trilog)
  • 19/02/2014: Approval by the COREPER of the compromise agreement with EP
  • 15/04/2014: Adoption by the EP
  • 14/05/2014: Council formal approval
  • 12/6/2014: Publication in the Official Journal of the European Union (entry into force: 20 days)
  • Level 2

The level 2 is made of:

  • 3 delegated acts – a directive and two regulations -; these texts have been written by the European Commission taking into account the Technical Advices provided by ESMA and are mostly focused on the Investor Protection part of MIFID2
  • A set of Technical Standards (RTS & ITS) – around 40 -; these texts have been by ESMA and shall become delegated acts.

Level 2 texts have been published in the EU Official Journal on the 31st of March (see paragraph Links)
Main milestones:

  • 23/4/2014: EC Mandate to ESMA
  • 22/5/2014: ESMA Consultations (deadline: 1er august 2014) 
  • December 2014: Publication of the ESMA technical advice and of a consultation paper (following the discussion paper of the summer) for the drafting of RTS/ITS.
  • 2015 (June, September, December): ESMA has transmitted over 40 draft RTS/ITS to the European Commission
  • 10/02/2016: the EC has adopted the postponement of the entry into application of the “package MIFID2/MIFIR”. The new date is the 03/01/2018 (one year delay).
  • 2016 (April and May): the EC has published three proposals (a delegated directive and a delegated regulation related to the level 1 directive and a delegated regulation related to the level 1 regulation)
  • 18/05/2016: the EP and the Council have approved the delay. The official agreement has been made on the 7th of June 2016
  • March 2017: publication in the EU Official Journal of the three delegated acts

Next Steps:


The rest of Q&A / guidelines needed to implement the new requirements
Guidelines on suitability
Consultations (TOTV, tick size)

Contacts SGSS/SMI :
Marie-Claire de Saint-Exupéry

Sylvie Bonduelle

Short Selling And Certain Aspects Of Credit Default Swaps

Reference text: European regulation 2010/0251 (COD)

Date of application:

1st November 2012


This regulation stems from two events that marked the financial world: the financial crisis in 2008, followed by the strong movements on sovereign debts. The financial crisis which followed the collapse of Lehman Brothers obliged regulators, more or less everywhere in the world, to take measures aiming to restrict short selling. These initial measures were taken as a matter of urgency without any real global coordination or coherence.

The objective of this regulation is to construct a preventative framework (comprising permanent measures, alongside temporary measures that can be activated by the competent authorities in exceptional situations), that is reasoned (the project does not undermine the benefits that short selling can entail under normal market conditions and exempts certain activities) and harmonised, aiming to govern short selling of shares and sovereign debts and the use of CDSs on sovereign debts. Such a framework is only fully effective of course if it is accompanied by a reinforcement of the powers granted to the local competent authorities and the ESMA, and an increase in the transparency necessary to exercise their function. The text thus specifies the role of the various competent authorities and stresses the need for cooperation among them.

Mainly targeted at investors (corporate entities and private individuals), the text covers short selling according to two themes:

  • an obligation for declaration to the authorities (possibly accompanied by a public version),
  • the obligation to have taken all necessary measures to enable settlement of the sale on the intended date. Concerning CDSs, it prohibits them from negotiating “naked”, i.e. without having a long position to hedge over the debt itself.

It should be noted that the text also imposes on Clearing Houses the establishment of penalties for late settlement and a harmonised buy-in procedure (activated 4 trading days after the intended settlement date) in line with what seems set out in the proposed regulation on central securities depositories. It is furthermore not the only case of connection between the proposed texts of the EC: the marking of short selling orders, once envisaged in this regulation, has been finally abandoned to the benefit of marking of transactions through the Transaction Reporting as set out in the future MiFIR. However as the Transaction Reporting is to be done by the entity executing the order, it is no more than a marking of orders since the seller will have to flag the order when sending it for execution. The only difference is that only executed orders will be declared.

The main points of the Regulation:

Scope: in order to provide for a preventive regulatory framework to be used in exceptional circumstances, the Regulation covers all types of financial instruments but provides for a response proportionate to the potential risks posed by the short selling of different instruments. It is only in the case of exceptional circumstances that competent authorities and ESMA are entitled to take measures concerning all types of financial instruments, going beyond the permanent measures that only apply to particular types of instruments where there are clearly identified risks that need to be addressed.

Transparency of significant net short positions: for shares admitted to trading on a trading venue in the Union, a two-tier model is introduced, that provides for greater transparency of significant net short positions in shares at the appropriate level: (i) at the lower threshold, notification of a position should be made privately to the regulators concerned; (ii) at the higher threshold, positions should be publicly disclosed to the market. A relevant publication threshold is a percentage that equals 0.5 % of the issued share capital of the company concerned and each 0.1 % above that.

A requirement to notify regulators of significant net short positions relating to sovereign debt in the Union should be introduced as such notification would provide important information to assist regulators in monitoring whether such positions are in fact creating systemic risks or being used for abusive purposes. Such a requirement should only include private disclosure to regulators as publication of information to the market for such instruments could have a detrimental effect on sovereign debt markets where liquidity is already impaired.

For sovereign debt, on the other hand, significant net short positions relating to issuers in the EU will always require private disclosure to regulators. The proposed regime also provides for notification of significant positions in credit default swaps that relate to EU sovereign debt issuers.
Natural and legal persons that hold significant net short positions shall keep, for a period of 5 years, records of the gross positions which make a significant net short position.
The text states that the relevant time for calculation of a net short position shall be at midnight at the end of the trading day on which the natural or legal person holds the relevant position.
The notification of information to a relevant competent authority shall ensure the confidentiality of the information and incorporate mechanisms for authenticating the source of the notification. 

Restrictions on uncovered short selling in shares: to reduce the risks of uncovered short selling of shares, the Regulation provides that a natural or legal person may enter into a short sale of a share admitted to trading on a trading venue only where that person has: (i) borrowed the share or has made alternative provisions resulting in a similar legal effect; or (ii) entered into an agreement to borrow the share or has another absolutely enforceable claim under contract or property law to be transferred ownership of a corresponding number of securities of the same class so that settlement can be effected when it is due or (iii) an arrangement with a third party under which that third party has confirmed that the share has been located and has taken measures vis-à-vis third parties necessary for the natural or legal person to have a reasonable expectation that settlement can be effected when it is due.
However, these restrictions don't apply to the short selling of sovereign debt if the transaction serves to hedge a long position in debt instruments of an issuer. Moreover, if the liquidity of sovereign debt falls below a specified threshold, the restrictions on uncovered short selling may be temporarily suspended by the competent authority. 

Exceptional situations: in exceptional situations that threaten financial stability or market confidence in a Member State or the EU, the Regulation provides that competent authorities should have temporary powers to require greater transparency or to impose restrictions on short selling and credit default swap transactions or to limit individuals from entering into derivative transactions.
In such a situation, the European Securities Market Authority (ESMA) is given a key coordination role, to ensure consistency between competent authorities and to guarantee that such measures are only taken where they are necessary and proportionate. ESMA is also given the power to take measures where the situation has cross-border implications. 

ESMA inquiries: ESMA may, on the request of one or more competent authorities, the European Parliament, the Council or the Commission or on its own initiative conduct an inquiry into a particular issue or practice relating to short selling or relating to the use of credit default swaps to assess whether that issue or practice poses any potential threat to financial stability or market confidence in the Union.

Cooperation with third countries: the competent authorities of Member States shall wherever possible conclude cooperation arrangements with competent authorities of third countries concerning the exchange of information with competent authorities in third countries, the enforcement of obligations arising under the Regulation in third countries and the taking of similar measures in third countries by their competent authorities.

Penalties: the measures, sanctions and penalties provided for shall be effective, proportionate and dissuasive. In accordance with Regulation (EU) No 1095/2010, ESMA may adopt guidelines to ensure a consistent approach is taken concerning the measures, sanctions and penalties to be established by Members States. ESMA shall publish on its website and update regularly a list of existing administrative measures, sanctions and penalties per Member State. 

Current situation:

Entered into force

Main steps:

  • The text was adopted by European Parliament on 14 March 2012 and published in the JO on 24 March 2012.
  • The ESMA published its proposal concerning technical standards (28 March 2012) and its opinion on level 2 measures (19 April 2012).
  • On 5 July 2012, the European Commission adopted delegated acts and technical standards proposed by the ESMA. Technical standards have been published on the EU JO on the 18 September.
  • On 17 September ESMA issued a consultation regarding exemptions linked the market making activity. Answers were expected for the 5 October at the latest.
  • In the meantime, buy-in procedures have been modified by CCPs in order to comply with this new regulation, going beyond the initial scope of the Regulation (shares and sovereign debts).
  • On 10 October: first update of the ESMA’s Q&A (first version dated 13th of September).
  • On 22 October: publication of the list of “Links to national websites for the purpose of the notification of net short positions”
  • 1 November 2012: Implementation
  • 9th of November: publication of the list of exempted shares (those whom principal trading venue is located in a third country)
  • Publication of the table of the net short notification thresholds for sovereign issuers
  • 10th of December: mandate given to ESMA for technical advice on the evaluation of this regulation (deadline 31st of May 2013)
  • January 2013: second update of the ESMA’s Q&A (previous one dated 10th of October)
  • 1st February: publication of ESMA’s guidelines on market making and primary market exemptions
  • 12th February: ESMA published a “call for evidence” in order to prepare its technical advice on the evaluation of the regulation; answers expected for the 15th of March.
  • 3rd of June 2013 ESMA published its technical advice on the evaluation of the regulation (expected on the 31st of May); ESMA has found that it has had some positive impacts and has suggested some improvements such as on the method to calculate the net positions or on the threshold used for the notification, on the exemption regarding market making activity …
  • 12th of June: ESMA published the Guidelines compliance table regarding exemption for market making activities and primary market operations (to be noted: the AMF answered that it intends to comply only when the guidelines will be fully applied throughout the EU).
  • 12th of September: in the case “UK against Council and Parliament” in the Court of Justice of the EU, advocate general found that article 28 of the SSR should be annulled. Article 28 gives ESMA certain powers to “intervene, by way of legally binding acts, in the financial markets of EU Member States in the event of a threat to the orderly functioning and integrity of financial markets or to the stability of the whole or part of the financial system in the EU”. The advocate general’s opinion is not binding on the Court of Justice. Deliberations should now begin.
  • 23rd of September: ESMA to find its short-selling ban has not disrupted the market, as participants had warned it would.
  • 13th of December 2013: the European Commission issued its conclusions based on the ESMA study. The Commission is on the opinion that no change should be made (even those proposed by ESMA) at this stage since (as admitted also by ESMA) it is a too short time period since the launch of the regulation to make any evaluation on its impacts. The Commission suggested such an exercise to be made in 2016.
  • The main caution point is on the settlement disciplines and particularly on the buy-in process as required for CCPs. Both ESMA’s and the Commission’s thoughts are to include such requirements in a more horizontal text as for example the future CSDR. 

Next Step:

The review of the text was foreseen (in the regulation) to take place by June 2013. In its report issued on the 13.12.2013 the European Commission stated that it was ‘too early, based on available evidence, to draw firm conclusions on the operation of the SSR framework which would warrant a revision of the legislation at this stage” and suggested that such evaluation should be conducted in the future.

The SSR has been amended by the CSDR where article 15 on the buy-in requirement has been removed. This requirement will be done through the CSDR.

Find out more:
Commission delegated regulation Projects and the Commission Report



Contact SGSS/SMI
Sylvie Bonduelle

Venture capital funds and social entrepreneurship funds

Reference documents: Regulation 345/2013 on European Venture Capital Funds and Regulation 346/2013 on European Social Entrepreneurship Funds




Date of entry into application: 22 July 2013


On 7 December 2011, the European Commission (EC) published two proposals for regulations, aimed at establishing a common framework for European venture capital funds and European social entrepreneurship funds in order to help SMEs obtain financing via such funds.

Common rules applicable to venture capital funds and social entrepreneurship funds:

  • Creation of a European label for European venture capital funds and European social entrepreneurship funds with 3 essential definition criteria: (1) the fund must invest at least 70% of the capital contributed by its clients in SMEs; (2) it must provide funding to these SMEs in the form of equity or quasi-equity; and (3) it must not use leverage for the fund (i.e. the capital it invests must not exceed the capital committed by investors).
  • The two documents only apply to managers of collective investment undertakings other than UCITS in accordance with Directive 2009/65/EC (UCITS IV) established and registered in the European Union.
  • Threshold for assets under management: the document only applies to fund managers whose assets under management do not exceed €500 million.
  • Eligible investors: professional investors within the meaning of MiFID and certain other traditional venture capital investors (such as high net worth individuals or business angels) if they undertake to invest at least 100,000 Euros in the fund, and if the fund managers comply with certain procedures giving them reasonable assurance that these investors are capable of making their own investment decisions and understanding the risks involved.
    • European Passport: making it possible to market such funds with eligible investors throughout the EU.
    • No obligation to use a depositary: the initiative makes no mention of a depositary, which seems to be a regression on the current French model and on the AIFM Directive concerning investor protection.
    • No organisational rules, risk management rules or precise valuation rules. Only five major principles have been laid down for fund managers: (1) they must be competent and diligent in their activities, (2) implement policies and procedures to avoid bad practices, (3) act in the interest of the fund and clients while respecting market integrity, (4), exercise due diligence in the selection of companies and their management within the portfolio, (5) have an appropriate level of knowledge.

Previous steps:

  • 31/05/2012: Vote by ECON Committee
  • 12/09/2012: Partial vote in plenary without legislative resolution (after successfully concluding the trilogues, the Council has reneged in its agreement in order to prevent the EU Parliament fighting too effectively against tax havens)
  • 15/03/2013 : Formal Approval by EU Council
  • 25/04/2013: Publication in Official Journal of the EU (L 115/1 and L 115/18)
  • 22/07/2013 : The EuVECA and the EuSEF Regulations came into force
  • Since December 2013: ESMA website hosts a central database of registered EuVECA/EuSEF managers
  • 13/02/2014 : ESMA submitted to the European Commission the draft ITS (Implementation Technical Standards) determining the format of the notification envisaged in Article 16.1 of EuVECA Regulation and 17 of EuSEF Regulation
  • 04/06/2014: Publication in the OJEU (L. 165/41 and 44) of the Implementing Regulations Nr 593/2014 and Nr 594/2014 (endorsement of ITS) laying down ITS with regard to the format of the notification according to Article 16.1 of EuVECA Regulation and Article 17 of EuSEF Regulation
  • 03/02/2015: Publication by ESMA of its Final Technical Advice to the European Commission on delegated acts of EuVECA and EuSEF Regulations
  • 30/09/2015: The Commission has launched a consultation on the review of the Regulations EuVECA and EuSEF with the aim of increasing the uptake of these funds. These funds have been available since 2013 but only a small number of funds set up as EuVECA and EuSEF have so far been launched.
  • 14/07/2016: Following the consultation, the Commission has published propositions of amendments to EuVECA/EuSEF regulations, with the aim of facilitating greater adoption of these fund designations by managers.
    The Proposal will amend the regulations in three main ways:
    * extending the range of managers eligible to market and manage EuVECA and EuSEF funds;
    * increasing the range of EuVECA eligible assets;
    * and making the registration and cross border marketing of these funds easier and cheaper.
  • 24/10/2016 : The Council of the EU has published a compromise proposal relating to the proposed Regulation amending the EuVECA and EuSEF Regulations.
  • 26/10/2016 : The European Parliament has published a note related to the legislation procedure of amendment to  EuVECA and EuSEF Regulations.
  • 30/05/2017 : Publication by the European Commission of a press release on the agreement by the Council and the European Parliament on the review of EuVECA et EuSEF Regulations.
  • 27/06/2017 :The Council published the final text of the review of the EuVECA and EuSEF regulations in which the following key changes have been agreed:
    * managers authorised as AIF managers will from now be able to market and manage these vehicles;
    * the range of companies in which EuVECAs can invest is expanded to include unlisted companies with up to 499 employees (small mid-caps) and SMEs listed on SME growth markets;
    * the text explicitly prohibits fees imposed by competent authorities of host Member States where no supervisory activity is performed. It simplifies the registration processes and also determine the minimum capital necessary to become a manager of EuVECAs and EuSEFs, i.e. EUR 50.000.
  • 14/09/2017 : The Parliament gave its approval to the amendments proposed for EuVECA and EuSEF regulations.
  • 09/10/2017 : The Council also adopted the amendments.
    The text adopted (dated 20 september 2017) is here :

  • SGSS/SMI Contact :
    Marie - Claire de Saint - Exupéry

PRIIPs Regulation

Reference Text : Regulation on key information documents for PackagedRetail and Insurance-based Investment Products


On 03/07/2012 the Commission adopted a proposal for a regulation for a new Key Information Document (KID) to be produced by investment product manufacturers and provided to retail customers when they are considering buying investment products. It aims to enable retail investors to understand and compare the key features and risks of the PRIIPs.

The PRIIPs Regulation applies to the manufacturers and persons advising on or selling.

Targeted products:

  • Packaged retail investment product means an investment where, regardless of the legal form of the investment, the amount repayable to the investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets which are not directly purchased by the investor.
  • Insurance-based investment product means an insurance product which offers a maturity or surrender value and where that maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations.
  • Exemptions: non-life insurance products, life insurance contracts where the benefits provided by the contract are payable only in the event of death or disability due to an accident, illness or disability, deposits other than structured deposits and securities, officially recognised pension schemes, retirement products recognised by national law as having the primary objective of providing the investor with income in retirement, individual retirement products for which an employer’s financial contribution is required.

Drawing up the KID: before placing a retail investment product on the market, the investment product manufacturer shall draw up a KID and publish this document on its website. Member States may require the initiator to notify the document in advance to the competent national authority.

Form and content of the KID: before a binding agreement is made, the retail investor shall receive a KID of a maximum of three A4 pages allowing them to take an informed decision and to compare retail investment products as well as insurance products.

The KID shall be accurate,fair, clear and not misleading. It shall be a stand-alone document, clearly separate from marketing materials, and be compatible with any binding contractual document.

Information to be included (among other):

  • the name and address of the initiator, information relating to the relevant national authority and the date of the document
  • a notification of specific environmental or social outcomes targeted by the investment product, as well as the way in which performance is measured
  • a description of the types of investors for whom the investment product is intended, especially in terms of risk appetite and investment horizon
  • a brief description of the risk and reward profile of the investment product, including for example, the maximum possible loss of invested capital
  • a brief description outlining, in the event of the initiator being unable to make the payments covered, whether the investment product is covered by a compensation scheme
  • the required minimum holding period and cashing in early
  • information about how and to whom a client can make a claim

Complex products : some of the investment products covered by the scope of the regulation are not simple and may be difficult for investors to understand. This is why Parliament has ensured that investors receive, when necessary, the following notice, “ You are about to purchase a product that is not simple and which may be difficult to understand”.

Responsibility in the case of losses: : the text foresees that if a retail investor shows that they suffered a loss through the use of the KID by investing in the retail investment product for which the KID was produced, this retail investor can seek redress from the initiator of the investment product for this loss, under the provisions of national law.

Complaints: the retail investors shall have an effective way of submitting a complaint against the initiator of an investment product based on insurance. Effective redress procedures shall also be available to retail investors in the event of cross-border disputes.

Penalties: the competent authorities designated by the Member States shall have the power to impose penalties such as the suspension or prohibition of the sale of a product, by publishing a public notice and imposing administrative fines of at least EUR 5 000 000 or at least 3% of annual turnover in the case of a moral person or a maximum amount of at least EUR 700 000 for individuals.

Application to UCITS/AIF: according to the Regulation Level 1, the funds that already produce a KIID UCITS have an exemption period until 31/12/2019 to produce the KID PRIIPS.

According to the first project of Regulatory Technical Standards (RTS or Level 2 measures) published by the Commission on 07/04/2016, the transitional period for UCITS/AIF would not apply for funds that have an underlying investment option of a unit-linked insurance product. Those funds would need to be ready for PRIIPS from the coming-into-force date.This item has been modified in the amended version of the RTS published on 08/03/2017 by the Commission.

Previous steps:

  • 20/12/2012: Publication of P. Bérès draft report (European Parliament)
  • 24/06/2013: Adoption by the Council of its general approach
  • 21/10/2013: Vote in ECON
  • 21/11/2013: Partial vote in plenary 
  • 29/01/2014: 1st Trilogue and 20/03/2014: last Trilogue
  • 15/04/2014: Adoption by the European Parliament
  • 30/07/2014: European Commission mandate sent to EIOPA for advice on possible delegated acts
  • 10/11/2014: Formal adoption by ECOFIN
  • 27/11/2014: The Joint Committee of the three European Supervisory Authorities, the ESAs (EBA, ESMA and EIOPA) published a Discussion Paper that focuses on the different sections of the KID such as “what are the risks?” and “what are the costs?” (answer on 17/02/2015).
  • 9/12/2014: Publication in the Official Journal of the European Union, the "OJ" (application period: 24 months, so initialy 31/12/2016)
  • 23/06/2015: Release of a Technical Discussion Paper on Article 8-5 (risks, performance and costs) on some RTS such as calculation method of risk indicator and costs borne by the investors.
  • 11/11/2015: The ESAs published a Joint Consultation Paper related to the content and the presentation of the KID PRIIPS (answer on 29/01/2016)
  • 07/04/2016: the ESAs published a project of RTS - level 2 measures - dated 31/03/2016 : “Final draft regulatory technical standards with regard to presentation, content, review and provision of the key information document, including the methodologies underpinning the risk, reward and costs information. », proposals in relation to the presentation and content of the KID (risk indicators, costs), revision of the KID, timing of publication of the KID.
  • 30/06/2016: The European Commission has adopted the RTS. The press release said that the European Parliament and the Council have a two-month scrutiny period, which they can extend for a further month.
  • 01/09/2016: The European Parliament’s economic and monetary affairs committee, known as ECON, voted in favor of rejecting the PRIIPs RTS.
  • 14/09/2016: The European Parliament voted also in favor of rejecting the PRIIPs RTS.
  • 09/11/2016: European Commission has proposed one-year-delay to PRIIPs implementation. PRIIPs will be applicable as from 01/01/2018 according to this proposal. As Level 1 of PRIIPs regulation was modified, this proposal had to be formally adopted by the European Parliament and then by the Council. The Parliament voted on 01/12/2016 in favor of this proposal and the Council did the same on 08/12/2016.
  • 10/11/2016: The European Commission submitted amendements to the ESAs for comment. Those amendments were notably related to Multi-option PRIIPs, performance scenarios and comprehension alert.
  • 22/12/2016: The ESAs wrote a letter to the Director General for financial stability of the European Commission to reject the proposed amendments. The ESAs explained that the amendments relating to how performance scenarios will be presented in the KID “raise comprehension issues and may be misleading”. The ESAs said they were nevertheless ready to work further on these amendments.
  • 23/12/2016: The postponement of PRIIPS application date to 01/01/2018 was published on the Official Journal of EU.
  • 08/03/2017 : Publication by the European Commission of revised RTS (Regulatory Technical Standards) supplementing the PRIIPs Regulation. Those new RTS replace the previous ones published on 30/06/2016 and rejected by the European Parliament on 14/09/2016.

The revised RTS main amendments concern:

  • Performance scenarios:
    The KIDs PRIIPs now contains a fourth scenario, so-called “stress scenario” along with the favourable, moderate and unfavourable scenarios that were already included in the previous version of the RTS.
    This stress scenario shows what an investor may get back in extreme market circumstances.
  • Multi-option products:
    The treatment of multi-option PRIIPs has been clarified.
    According to the new RTS, PRIIPs manufacturers will have the option to use the UCITS KIIDs to provide specific information related to underlying investment options for MOPs until 31/12/2019.
    However this exemption remains partial as additional information will have to be provided to insurers in the scope of MOPs.

The “Guidelines” cover topics such as:

  • definition of PRIIPs manufaturer
  • products covered by the PRIIPs Regulation
  • products made available to retail investors
  • multi-option PRIIPs (MOP)
  • territorial application
  • competent authority
  • translations of key investor information documents (KIDs)

The Q&A covers notably the following items:

  • General topics
  • market risk assessment
  • methodology for assessing credit risk
  • summary Risk Indicator
  • performance Scenarios
  • derivatives
  • methodology for the calculation of costs 

SGSS/SMI contact:
Marie - Claire de Saint - Exupéry

SOLVENCY Directive

Reference Text: European Directive 2009/138/EC

Date of Application

1st  January 2016


The SOLVENCY II Directive has the aim of modernising and harmonising the solvency rules applicable to insurance companies in order to reinforce the protection of policyholders, encourage companies to improve their risk management and ensure harmonised application of legislation in the European Union. After SOLVENCY I, which stipulated a solvency margin determined only according to percentages on premiums and/or claims, insurance legislation moved to more sophisticated rules integrating the different types of risk (market risk, credit risk, life and non-life subscription risk, operational risk) and now draws on valuations of assets and liabilities at market values (i.e. the “fair value” as defined in the IFRS). The former solvency margin is now replaced with 2 new concepts: the MCR (Minimum Capital Requirement), minimum amount of equity below which the insurer loses its approval, and the SCR (Solvency Capital Requirement), target equity amount which is calculated either from the standard model proposed by the regulator, or from a model developed internally but validated by the regulator, on the understanding that it will of course be possible to mix standard model and internal model according to the peculiarities of the company.

Like its “Basel II” banking counterpart, Solvency II is based around three pillars:
Pillar I determines quantitative requirements to be respected, particularly in harmonising the calculation of technical provisions and the MCR and SCR.
Pillar II requires the establishment of risk governance systems (processes, responsibilities, production and monitoring of indicators, etc.)
Pillar III fixes market discipline to increase transparency of the information sent to policyholders and to the regulatory authorities.

Current Situation

Final adoption on March 11, 2014 of the Directive Omnibus II, officialising the date of January 1, 2016 for the implementation of SOLVENCY II and giving widened powers to the EIOPA to specify the implementation framework, particularly regarding guidelines and “Implementing Technical Standards" (ITS).

Application since January 1, 2014 and through January 1, 2016 of the preparatory measures published on September 27, 2013 by the EIOPA, the European insurance regulator. These transitional measures focus on pillars II (governance) and III (reporting).

On 10 October 2014 the Commission adopted a Delegated Act containing implementing rules for Solvency II ( but waiting agreement from European Parliament and Commission under 6 months)

Next Steps

  • January 1, 2016: Application of SOLVENCY II.

Find out more

SGSS Contact
Laurent Plumet
Alain Rocher

EMIR Regulation

Reference Text : European regulation – 648/2012

Link :





Public Register for the clearing obligation under EMIR

Public Register for third country CCPs agreed by ESMA


Date of application: 16 August 2012


This text responds to the undertakings of the G20 (2009 Pittsburgh Summit) in order, by the end of 2012, to increase the transparency of the derivatives market and reduce the current risk induced by transactions which mostly remain dealt bilaterally (pure OTC – Over The Counter). It can be likened to the American Dodd Franck Act which dedicates part of the text (chapter VII) to the regulation of these transactions.

EMIR is made up of three main topics

  • The mitigation of the risk for OTC derivatives contracts
    • Mandatory clearing for products considered sufficiently standards
    • For contracts not cleared, reinforcement of the rules to mitigate both the operational risk and the counterparty risk (for example via bilateral exchanges of initial / variation margins)
  • Transparency via the mandatory reporting to Trade Repository of derivatives contracts (ETD and OTC)
  • Infrastructures :
    • Reinforced requirements for Central Counterparties
    • Creation of a EU Trade Repository status

For more information please refer the European Parliament (Legislative Observatory); links are indicated in the Link paragraph of this document

Current Situation:

  • Reporting to a Trade Repository (since 2014)

ESMA has proposed to modify the deadline as regards backloading.

Backloading concerns contracts that have been:

  • Either concluded before the entry into force of EMIR (16/08/2012), still open at that date and closed before the start of the reporting obligation (12/02/2014)
  • Or concluded after the 16/08/2012 and closed before the 12/02/2014

Texts amending the delegated acts 148/2013 and 1247/2012 have entered into application on the 1st November 2017. The new deadline for backloading is the 12/02/2019.

According to its 2018 workplan, ESMA intends to launch a consultation on the details and type of the reports in relation to article 9(5) of EMIR.

ESMA has issued an updated version of its validation rules (1st March).

ESMA has issued on the 27th of March guidelines on how Trade Repositories should calculate derivative positions. These should set out a consistent and harmonised approach.

  • Operational risk mitigation techniques for non-cleared contracts (since 2013)

No change compared to the initial requirements

  • Counterparty risk mitigation techniques for non-cleared contracts (since 2017)

The delegated regulation on risk mitigation techniques for OTC derivative contracts non-cleared by a CCP, has started on the 6th of February (reference of the text: 2016/2251)

As of the 1st of March, exchanges of variation margins are always required (except for specific cases); regulators at different levels (international, European as well as domestic) have recognised the difficulty for parties change current contracts.


2 counterparties above

3000 billions €

2 counterparties above

2250 billions €

2 counterparties above

1500 billions €

2 counterparties above

750 billions €

2 counterparties above

8 billions €

At least 1 counterparty below

8 billions €

Initial Margin (IM)







Variation Margin (VM)







VM (FX forwards) (**)







(**) see above point on FX forwards definition

Man should note that the same phase-in exists at an international level; except for the first date (6/02/2017) the EU calendar is consistent with the former.

According to its 2018 workplan, ESMA intends to launch a consultation (jointly with the ESAs) on “EMIR risk management techniques for OTC derivatives not cleared in relation to covered bonds and securitisation”

  • Clearing obligation
    The Public Register for the clearing obligation under EMIR is on the website of ESMA (see page 1§ Link)

IRS et CDS :

The clearing start date for “category 3 contracts” is officially postponed until the 21/06/2019. The delegated act (2017/751) has been published in the EU Official Journal on the 29th of April. The new date is the same for all the products.

Accordingly counterparties in category 4 will start before. This is not seen by ESMA as inconsistent since it appears, ESMA says, that counterparties in category 4 (namely NFC+) may be more active than small FC (those in category 3).

The new calendar:


Categ 1

Categ 2

Categ 3

Categ 4

IRS wave 1










IRS wave 2





NDF FX : no mandatory clearing for the moment

According to its 2018 workplan, ESMA intends to launch:

- a consultation on “new classes of derivatives subject to the clearing obligation”
- a consultation (jointly with the ESAs) on “the criteria about mitigation of counterparty credit risk in relation to covered bonds and securitisation and with respect to the EMIR clearing obligation”

  • Intersection with MIFID2/MIFIR : trading obligation (2018)

EMIR defines products that are considered sufficiently standards to be under a mandatory clearing; MIFID2 will complete the process by defining within those « to be cleared » products the ones seen as sufficiently liquid to be additionally under a trading obligation on a trading venue (i.e. regulated market, MTF or OTF).

ESMA has just issued its final proposal (now in the process of adoption by the European commission). In ESMA’s opinion will be required to be traded on a trading venue:
- For IRS : Fixed-to-float interest rate swaps denominated in EUR, USD and GBP
- For CSD : iTraxx Europe Main and iTraxx Europe Crossover

  • Jointly with MIFID2/MIFIR : indirect clearing (3/01/2018)
    Two regulations have been published together (the 2017/2154 in relation to MIFIR and the 2017/2155 which amends the 149/2013 regulation of EMIR). These two texts focus on the access to clearing when not being a clearing member or a client of it (the so called indirect clearing arrangement). MIFIR handles ETD when EMIR is about OTC derivatives.
  • FX spots/FX forwards definition
    As of the 3rd of January 2018 (date of entry into application of MIFID2/MIFIR) contracts on physically-settled FW forwards shall include exchange of variation margins. This obligation will lead to an issue in terms of completion since there is no equivalent requirement either in the US or in Asia. There is an ongoing process at the EU level and the European Supervisory Authorities have transmitted on the 18th of December to the European Commission their draft amendment of the current delegated regulation. Aware of the tight calendar as regard the 3rd of January 2018 they also called the local regulators to exercise their supervision task in a proportionate manner.
  • Exemption of clearing and of reporting
    The EC proposes to include in the list of National Central Banks exempted those of the following countries: Australia, Canada, Hong Kong, Mexico, Singapore, Switzerland.
  • CCPs agreements
    No new agreement
  • EMIR review

The European Commission has published on the 4th May 2017 its draft proposal. The main points are:

- FC split in FC+ and FC- (same as for NFC): FC- will be exempted from the clearing obligation
- NFC+ will be under the clearing obligation only for the class(es) of assets for which they are above the threshold
- ETD reported solely by the CCP, transactions involving a NFC- and a FC reported solely by the latter, exemption for intra-group transactions involving NFC counterparties (however not a single side reporting)
- pension scheme exemption is maintained
- suspension of the clearing obligation by request from ESMA

The European Council has published its amendments to the EC’s proposal. It should be noted that the Council has proposed a change in relation to mandatory Variation Margins for physically settled FX forwards in line with the ESAs’ proposal.

The European Parliament has published its remarks / amendments to the EC proposal on the 26 of January 2018. The next step is for ECON to vote to finalise the draft report, before it is considered by the EP in plenary (the vote is scheduled in committee on the 16th of May 2018).

According to its 2018 workplan, ESMA intends to launch several consultations to consider the proposals contented in the EC draft text.

  • EMIR – proposal for a more robust supervision of CCPs
    The European Commission has put forward on the 13th of June 2017 its proposals :

- For EU CCPs: a more pan-European approach for their supervision, closer cooperation between regulators and central banks responsible for EU currencies, a strengthened role given to ESMA
- For non-EU CCPs: a classification of third country CCPs (Tier 1 / Tier 2) depending on the risk they could represent to the EU; the recognition process is reinforced for Tier 2 CCPs due to the key systemic importance they have for the EU
- Depending on the systemic risk a third country CCP may represent, the European Commission may decide to require the CCP to be established in the EU in order to provide its services in the EU

At the European Parliament level, the draft report by MEP Danuta Hübner has been released on 31 January. Amendments have been presented during a ECON meeting on the 23rd of April. The European Parliament still aims to have a final vote on the 16th or 17th of May. Main divergence of opinion remains on the location of third country’s CCPs.

  • Documentation
    A Q&A dedicated to EMIR and regularly updated could be found on the ESMA’s website (please refer to paragraph Link)

Next Steps:


Adoption of the proposal from the ESAs on the VM – FX forwards issue
New consultations to be issued on EMIR (ESMA)
New consultations to be issued in relation to EMIR Refit (ESMA)
Ongoing process in relation to EMIR review proposal (EC, EP and Council)
Ongoing process in relation to the supervision of CCPs (EC, EP and Council)

Key Dates:

Following its adoption by the Council on the 4th of July 2012, the final text for EMIR was published in the Official Journal of the European Union on 27th of July 2012. Its application date will therefore apply 20 days following its publication, the 16th of August 2012.

It was nevertheless only able to be applied once the technical implementing measures have been specified (the level 2 measures) regarding the recognition procedure for CCPs, the classification of OTC derivatives, the definition of calculation rules for margin calls for the remaining OTC transactions. 

Except two of them (on third country and on margin requirements for non-centrally cleared derivatives), standards have been adopted by the Commission on the 19th of December and published in the EU JO the 23rd of February 2013 for an entry into force the 15th of March 2013.

This date is the first day for some of the requirements regarding risk mitigation techniques for non-cleared contracts like timely confirmation (all parties are concerned) as well as valuation (for financial counterparties and non-financial ones when above the thresholds – NFC+). Non-financial counterparties are also required as of the 15th of March to declare them as NFC+. This is also the start of the period for Trade Repositories and CCPs to send their application form to their authorities.

Other requirements linked to the risk mitigation techniques (except those on the margins) have entered into force 6 months later, ie the 15th of September 2013.

The reporting to a Trade Repository firstly foreseen to September 2013 for IRD and CDS, then postponed to the 1st of January 2014 started finally on the 12th of February 2014 irrespective of the class of assets for both listed and OTC derivatives). Indeed, ESMA agreed the first Trade Repositories on the 28th of November 2013.

On the 18th March 2014, NASDAQ OMX was the first CCP to be agreed under EMIR; this date is important regarding the frontloading requirement. A trade on a product cleared by this CCP concluded or novated at this date or after may be subject to the clearing obligation.

Immediately after, ESMA has started its process as regards the mandatory clearing (IRS, CDS as well as NDF FX have been assessed according to the 3 criteria defined by ESMA to determine if a product was standard). ESMA’s conclusions have been issued between 2014 and 2015. The related delegated acts will be adopted end of 2015 and beginning 2016. The mandatory clearing began on the 21st of June 2016 for certain IRS and counterparties that are also clearing members.

Two years after their Discussion Paper, the 3 ESAs (ESMA, EIOPA and EBA) issued on the 14th of April 2014 their Consultation Paper on risk mitigation techniques for OTC derivatives contracts not cleared by a CCP. A second consultation took place in 2015, the final draft being officially transmitted to the Commission in March 2016. Then discussions between the two bodies started and lasted until the year’s end.

The delegated act imposing the risk mitigation technique for non-cleared contracts has been adopted on the 15th of December 2016 for an entry into application in February 2017 (6 February 2017: start of the obligation to exchange initial and variation margins for the biggest player; 1st of March 2017: start of the obligation to exchange variation margins for all the others).

End of March 2016: ESMA has fined DDRL (subsidiary of DDTC) €64,000 for negligently failing to put in place systems capable of providing regulators with direct and immediate access to derivatives trading data (between March 2014 and December 2014). ESMA has also issued a public notice detailing the negligence.

SGSS/SMI Contact
Sylvie Bonduelle

T2S Project

Reference Texts : Initiative 07/07/2006

Official launch of the T2S project by the ECB on 17/07/2008

Launch Date: T2S implementation plan is currently under review. Initially the following 4 waves of migration were planned:

  • Wave 1(22 June 2015): BOGS, CSD of Romania, CSD of Malta, MonteTitoli, Six Sis Ldt
  • Wave 2 (28 March 2016) : NBB-SSS, Euroclear ESES, Interbolsa,
  • Wave 3 (12 September 2016) : Clearstream Banking Frankfurt, OeKB, LuxCSD, VP Securities, VPLux,
  • Wave 4 (6 February 2017) : Iberclear, CSD of Slovenia, Euroclear Fin, CSD of Estonia, CSD of Lithuania, CSD of Slovenia, Keler Hungary, BNY Mellon

BNY Mellon has confirmed it will not launch its CSD activity. Montetitoli postponed its migration to 2015, August the 31st and Euroclear has indicated its uncapacity to migrate on September 2016. 3 options have been further analysed to redefine a new planning during a dedicated T2S CSG on 2015 December the 10th and the following scenario has been issued and been endorsed by the Council of Governor in 2016, March the 18th .:

Wave 1
22 Jun 2015 - 31 Aug 2015

Wave 2
28 Mar 2016

Wave 3
12 Sep 2016

Wave 4
6 Feb 2017

Final wave
18 Sep 2017

Bank of Greece Securities Settlement System (BOGS)

Interbolsa (Portugal)

Euroclear Belgium

Centrálny depozitár cenných papierov SR (CDCP) (Slovakia)

Baltic CSDs (Estonia, Latvia, Lithuania)

Depozitarul Central (Romania)

National Bank of Belgium Securities Settlement Systems (NBB-SSS)

Euroclear France

Clearstream Banking (Germany)

Euroclear Finland

Malta Stock Exchange


Euroclear Nederland

KDD - Centralna klirinško depotna družba (Slovenia)

Iberclear (Spain)

Monte Titoli (Italy)


VP Lux (Luxembourg)

KELER (Hungary)


SIX SIS (Switzerland)


VP Securities (Denmark)

LuxCSD (Luxembourg)


Oesterreichische Kontrollbank (Austria)


T2S is currently evolving to :

  • a phase of consolidation with Target 2 plateform for synergies
  • an harmonzation of technical processing and procedures of collateralisation in the Eurosystem through a new paneuropean system called ECMS (European Collateral Management System)


T2S or TARGET 2 - Securities is a European initiative proposed by the European Central Bank (ECB) on 7 July 2006. The project was officially launched on 17 July 2008 and entrusted to 4 European central banks (France, Germany, Italy and Spain). This initiative stemmed from the willingness of the European authorities to encourage the consolidation of European post-market infrastructures, specifically Central Securities Depositaries (CSDs), in order to promote better market integration and facilitate cross-border investments with reduced costs and processing delays in a secure environment.

Profiting from the successful rollout of the Target 2 platform, which deals with payments in euros between European national central banks, the ECB wanted to provide European CSDs with one single platform for processing the settlement of securities in European central bank money. Initially only the Euro zone was targeted, but the ECB quickly realised that extending the scope to other European countries would be beneficial. To this end, the T2S platform, which uses the same technical architecture as T2, centralises securities accounts of the Central Securities Depositories (CSDs) connected to T2S with their cash accounts opened with the central banks. The consolidation of the accounting environments for platform participants enables automatic settlement between CSDs, as well as simultaneous securities delivery and cash settlement.

T2S is only a technical platform and not a new CSD for Europe. As the Eurosystem only acts as a platform operator, participating CSDs and national banks remain responsible for their accounts and for supervising the processing cycle. Moreover, only settlement is concerned, all other services relating to the financial instruments, such as issuer services or corporate actions, will continue to be managed by the CSDs. Depending on the client profiles, CSDs will be able to offer them the opportunity either to connect directly to T2S (which is expected to be the case for pan-European players, major custodians, clearing houses and stock exchanges) or to continue to use their legacy channel for transmission of their instructions (for smaller scale players and/or with a mainly domestic business).

Current Situation:

  • Validation of the Framework Agreement by the Council of Governors (17/11/ 2011)
  • Choice of two Value Added Network (VAN) suppliers (30/11/2011). The licences have been attributed at SWIFT and SIA/COLT (23/12/2011). CoreNet has been retained by the ECB for the dedicated line option for T2S connectivity (17/11/2011): no T2s actor declares its interest to use this connectivity option, so the Dedicated link option will not be made available by the ECB.
  • The Currency Participation Agreement (the possibility for the central banks outside the euro zone to allow their local currency to participate in T2S) has been validated by the Governing Council
  • Le Currency Participation Agreement (possibilité pour les banques centrales européennes hors zone euro d'autoriser leur devise nationale à participer à T2S) a été validé par le Conseil des Gouverneurs le 23/02/2012
  • 17 CSDs of euro countries and 5 of non-euro countries signed the framework agreement (including BNY Mellon, recently agreed as a CSD)
  • 31 candidates for DCP (Direct Connected Participant) on 2013 October the 15th
  • 22 June 2015: BOGS, Romania, Malta, Six Sis Ltd migrated to T2S
  • 31 August 2015 Monte Titoli migration
  • October 2015 ESES migration postponment request from Euroclear
  • 10 December 2015 T2S CSG draft the new migration planning
  • 18 March 2016 Governor Council endorsed T2S CSG planning proposal
  • 12 September 2016 wave 3 migration
  • 6 February 2017 wave 4 migration
  • 18 September 2017 migration of Iberclear, Euroclear FIN, Baltic CSDs (Lituania, Estonia, Latvia)

Next Steps:

October 2018 : migration of CSD and currency (DKK) of Denmark

Find out more :

SGSS Contact
hugh.palmer@sgss.socgen.com, Head of T2S Program.


[1] Trans European Automated Real time Gross settlement Express Transfer

Harmonising settlement cycles at T+2

Reference documents: Article 5 of the regulation on CSDs text issued on 2014, August the 28th




Specifications for the French Financial market

Article 27 of the Act of 11 October 2010 integrating article L 211-17-1 into the Monetary and Financial Code

For information US site for T+2 switch: www.ust2.com

Date(s) of effect:

6 October 2014: date of the first transactions traded on a settlement basis of 2 days for 29 countries in Europe (Austria, Belgium, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Iceland, Italy, Ireland, the Netherlands, Latvia, Lichtenstein, Lithuania, Luxembourg, Malta, Norway, Poland, Portugal, Romania, Slovakia, Spain (for bonds), Sweden, Switzerland, and the United Kingdom) as a result of the European industry initiative following France ones. Bulgaria, Germany and Slovenia were already settling on a T+2 basis.

1st January 2015: Deadline according to the CSD Draft Regulation (see corresponding sheet): saving exceptions that may push back this deadline to 1st January 2016 or within the 6 months prior to a country migrating to T2S.


Article 5 of the European regulation on Central Security Depositaries (CSD R, see our summary sheet) imposes a harmonisation of settlement cycles within two days of the trade date, saving a bilateral agreement between both parties in the framework of transactions outside regulated markets.

In parallel, the change made to the French Monetary and Financial Code on 11 October 2010, followed this trend by imposing this reduction in the settlement cycle to two days on condition an equivalent system applied in the other European countries.

Given the uncertainties as to the adoption of the draft CSD R and the increase in the number of major market projects (Move to T2S, implementation of standards on the processing of transactions on securities in Europe, etc.) the French financial market launched an impact study in 2011 for the various players enabling an optimal date for the move to T+2 to be targeted if the January 2015 date was confirmed by the CSD Regulation.

The Paris Market thus published an initial Financial Market Specifications document in 2013 strongly recommending the date of 6 October 2014. This recommendation was shared with the members of the Euronext zone who adopted it in turn.

At the end of 2013, given how bogged down the CSD Regulation was and seeing that the French project, then that of the ESES and Euronext zone, tended to spread throughout Europe, the T2S Harmonisation Steering Group set up an extended work group aimed at monitoring the move to D+2 in Europe and more particularly in the T2S zone by making some recommendations.

Current situation:

  • 11 October 2010 adoption of the 2 day Settlement Cycle in France, subject to an equivalent movement in Europe,
  • 7 March 2012: draft CSD R text adopted by the Commission
  • 4 April 2012: opening of negotiations on CSD R at the Council
  • 4 February 2013: vote in ECON of the CSD R draft amended by the Parliament.
  • 20 May 2013. plenary vote on the CSD R in the Parliament.
  • 26 September 2013: agreement of the Council, opening of the trialogue procedure on the CSD R (Council, Parliament, Commission).
  • 15 November 2013: 1st meeting of the T2S Task Force on T+2
  • 28 August 2014: official publication of CSD R
  • 5th of May 2014: ECB recommendations regarding switch over T+2
  • 6th of October 2014, switch over T+2 of 29 European countries. Germany, Bulgaria and Slovenia were already under a T+2 regime.
  • 1st January 2015: Current T+2 implementation deadline saving exceptions enabling an extension of the deadline for few markets intending to join T2S (Spain).
  • 4th October 2016 Switch over to the T+2 settlement cycle for the Spanish equities market.
  • 5th September 2017 USA Switch over to T+2.

SGSS/SMI contact
Pierre Colladon

CSD Regulation

Reference text: Final text dated published to the EC Journal Officiel of 2014, August the 28th.




Final level II text dealing with CSD agreement, internalized settlement reports and penalties calculation.


Date(s) of effect:

Officially published on 2014, August the 28th, this regulation enters into force on 2014 September the 17th with few exceptions, some parts being immediately effective and some others needing ESMA and EBA standards.

  • “T+2” (settlement cycle within the 2 days after the trading date) is now in place (deadline on January 2015, the 1st or six months before any outsourcing of a Securities Settlement Engine-SSE), the last switch to T+2 was made by Spain in October 2016, the 4th.
  • Securities dematerialization or immobilization (before 2023 for new issuance, and 2025 for all)
  • CSD has 6 months delays after ESMA or EBA standards enforcement to be agreed. This deadline is on 2018 March the 31st.
  • Following measures are already effective or to be in place before the CSD agreement:
    • General framework (scope, concepts)
    • Book entry principle for dematerialized tradable securities
    • Account segregation possibilities for client of CSD participant at CSD level
    • Definition of Settlement Finality 1 by each CSD
    • Outsourcing possibilities for core CSD function (SSE in view of T2S).
  • Following measures imply publication of technical advice or technical standards by ESMA or EBA and their publication was initially planned for summer 2016 but first final technical standards (CSD agreements, Settlement Internalisers, Penalties calculation) has been published in March 2017 (with implementation phase):
    • Settlement discipline regime including information and confirmation of trade execution as quick as possible (standards not published), obligation to report “internal settlement” (standards published) in to authorities, penalties and “buy in” procedures (not published). ESMA mentions a 24 months period of implementation (“phasing”) after publication of standards waited for the first semester of 2018 leading to effective implementation before the first semester of 2020.
    • Business framework for CSD activities (designation of competent authorities, CSD licensing, passport of CSDs, third countries CSDs, organizational and transparency rules and CSD governance, risk mitigation, integrity of issuance, free choice of a CSD for an issuer... (standards published) (by end of March 2018)
    • Segregation between CSD business and banking activities including derogatory regime (standards published) (by end of March 2018)
    • Interoperable links between CSDs before September 2019 (standards published).

Following its Discussion Paper of March 2014 (deadline for answers on 2014 May the 22nd) ESMA leaded a public consultation in December 2014 the 18th on draft technical standards and a technical advice to the Commission on delegated acts concerning penalties for settlement defaults with a deadline on 2015, February the 19th).

In the same time, EBA, in cooperation with ESMA has launched a consultation on banking service provision and credit and liquidity risks monitoring including intraday aspects on 2015, February the 27th with a deadline on 2015, April the 27th.

Following its demand for delay, ESMA has published draft technical standards on 2015, September the 28th to European Commission regarding measures related to CSDs and internal settlement report from custodian to their authorities. This has been completed by prudential measures related to banking activities complementing CSD ones.

The Authority has decided to make a new consultation during the summer 2015 regarding where execution of Buy In should be executed or operated (trading party, trading party with fall-back option, CSD participant level operating the buy-in) and ESMA published its draft technical standards and associated reports in 2016 February, the 1st. As already mentioned some standards have already been published, only standards related to settlement discipline are now waited to be published during the first semester of 2018.

If no adaptation period is mentioned, standards are enforced 20 days after their publication to the official gazette of European Union. An exceptional extension of 24 months of “phasing” period has been suggested by standards for settlement discipline implementation due to T2S waves. The same delay has been set up for settlement internalization due to its link with settlement discipline regime.


The European CSD text has the objective of defining the regulatory framework in which the function of Central Securities Depository must be exercised and of improving settlement in Europe.

This text takes the form of a regulation enabling immediate application without requiring transposition into local law.

The draft is based around 6 chapters and an annex specifying the services falling within the scope of the CSD regulation.

Title 1 describes general framework of the text (scope and concepts).It defines the Central Securities Depository as a legal entity managing a settlement/delivery system and holding either a notarial position or a central securities account management position (article 2 (1) and appendix A).

Title 2 has the purpose of improving settlement and associated discipline in Europe:

  • By imposing book entry principle for listed securities on regulated markets (article 3) with a deadline postponed in 2025.
  • By instituting a settlement/delivery cycle taking place a maximum of two days after trading date (T) (article 5). It targets securities not represented by certificates admitted for the operations of the central securities depository and traded on regulated market (and on the MTF and OTF trading platforms). Harmonisation on “T+2” must be effective by 1st January 2015 with specific cases of postponement to 2016 or six months before a T2S migration. Over The Counter operations are by definition excluded from the scope.
  • By describing measures for management of settlement failures (articles 6 and 7), in particular by implementing penalties and Buy In procedures. Proposals vary within a window of deadlines between 4 to 7 days after Intended Settlement Date with exception for SME growth securities (14 days). Potentially each CSD may define its own deadline in this window. The level 1 text approach is strict with a systematic (mandatory) Buy In procedure. The level 2 standards are looking into where to operate this Buy In procedure. Procedure should take in account cooperation between CCPs and CSDs.
  • By imposing to Custodians to report “internalised settlement” every 3 months, meaning settlement done in the books of a bank. (first reporting to be done on 2019 July the 12th)

Title 3 aims to design the business framework for CSD activities. It;

  • defines the framework for issuing licences and for supervision of CSDs defined by the local market authorities reporting to the ESMA,
    • it includes supervision by National Central Bank concerned by the currency of payment
    • the licence may include investment services, provided the CSD complies with MIF
  • permits a CSD to outsource core services (art. 19) allowing T2S to be used by CSD
  • introduces the concept of passports for CSDs, (art. 23)
  • authorises third countries CSD to operate in Europe provided being respectful of the rules of hosting country and authorises European CSDs to have links with third countries CSDs.
  • Imposes rules of organisations and transparency to CSD, rules of security and integrity including to CSD participants the obligation to offer segregated accounts in the name of the clients at CSD level if requested by the investor.
  • Imposes CSD to define SF1 (moment of entry)
  • Defines rules in regards with risk mitigation (capital requirements, investments, links…)
  • authorises an issuer to freely choose its central securities depository guarantor of its issue.

Title 4 defines a clear separation between the banking institutions and the Central Securities Depository is established and conveyed by segregation between the settlement/delivery activities and their translation into cash, which is assured by the banks (central or commercial). The principle of a “limited purpose bank” is introduced to offer ancillary services to Settlement (art 54-5). However CSD may provide services listed in appendix C with a specific derogation.

The last chapters cover sanctions and fix the period for adaptation of CSDs affected by the text depending on the issuance of ESMA Standards.

Current situation:

  • 14 March 2012: draft text adopted by the Commission
  • 4 April 2012: starting period of Council negociation
  • 4 February 2013 : ECON vote of the amended project (Parliament process only)..
20 May 2013 Parliament Plenary vote.
  • 25 September 2013: Council agreement allowing trilog process (Council, Parliament, Commission).
  • 24 February 2014 COREPER final acceptation
  • 15 April 2014 vote by European Parliement
  • 22 May deadline to answer to ESMA Discussion Paper
  • 28 August 2014 : official publication at “Journal Officiel” of European Commission
  • 17 September 2014 text enforcement provided exceptions or publication of standards if needed.
  • 18 December 2014 ESMA consultation on technical standards and technical advice and delegated act related to penalties on settlement default.
  • 6 October 2014 voluntary switch to T+2 of the main part of European securities industry following the French Initiative
  • 1st January 2015 : deadline to switch to T+2 (exception of Spanish market)
  • 19 February 2015 ESMA Consultation deadline
  • 27 February 2015 EBA Consultation (standards on liquidity and banking aspects)
  • 27 April 2015 end of EBA Consultation
  • 18 June 2015 initial deadline for ESMA standards and technical advice presentation to European Commission, postponed to September 2015.
  • 6 August 2015 End of the specific ESMA Consultation on Buy In
  • 18 September 2015 ESMA publication of draft standards and technical advice regarding CSD regulatory framework and reporting of internal settlement by custodians.
  • 15 December 2015 EBA publication of draft standards on prudential measures regarding banking activities dedicated to CSD
  • 1st February 2016 publication of draft technical standards and associated reports on settlement discipline regime.
  • 4 October 2016, final switch to T+2 of Spain (listed securities)
  • 11 November 2016, publication of final technical standards (Level II) regarding licensing of CSD and agreement procedure, quarterly reporting of settlement internalisers and penalties calculation mechanism.
  • 10 March 2017, official publication of above final texts
  • 23 Mars 2017, ESMA guides publication on CSD participant default procedure and CSD access for CCP and Regulated Markets
  • 14 September 2017 deadline to answer to ESMA consultation paper on guidance for reporting of internalized settlement.
  • End of September 2017 deadline for CSD to present their form for licensing

Next steps:

  • 1st semester 2018, new goal for level II texts publication related to settlement discipline
  • End of March 2018 CSD agreements
  • 12th of July 2019, first report of settlement internalisers to their respective authorities
  • 1st semester 2020 end of « phasing » period to implement settlement discipline regime
  • 1st January 2023 any new security shall be issued in book entry
  • 1er January 2025 all securities shall be in book entry

/SMI contact:
Pierre Colladon
Sylvie Bonduelle

Find out more:
Impact study

Legal Entity Identifier (LEI) CFTC Interim Compliant Identifier (CICI)

Reference documents

Standard (ISO 17422)
FSB website
ROC website
FSB charter on ROC
List of "Pre-LOUs" within the framework of issuing "Pre-LEIs"
List of assigned CICIs
Pre-LEI attribution form of INSEE and consultation list of existing Pre-LEI given by INSEE

Effective date(s)

  • CICI: March 2013 for derivatives processed in the USA
  • Automn 2013 : EMIR imposed the use of LEI for some derivatives in Europe
  • LEI: 3rd quarter of 2014 obligation to use the code in financial transactions.


Conducted by the FSB (Financial Stabilty Board), the creation of the Legal Entity Identifier (LEI) follows the difficulties encountered during the identification of the legal entities of Lehman Brothers that were involved in the financial transactions and affected by the failure of the establishment.

LEI aims to respond to the need to distinctly identify the legal entities (other than individuals) involved in financial transactions.

In this framework, a codification standard has been defined (ISO 17422). This standard makes it possible to establish codes with 20 alphanumeric characters to which additional public data (name, address, status of the identifier, etc.) and non-public data (legal form, "parent" entities, i.e. the entity that is liable in the event of failure, etc.) are attached.

The deployment of an organisation able to administratively manage the LEI is associated to this definition of the standard. This organisation came into effect in the 2nd quarter of 2013 and revolves around three bodies:

  • the ROC or Regulatory Oversight Committee, the worldwide administrative supervisory body
  • the COU or Central Operating Unit in charge of data integrity
  • the LOU or Local Operating Unit which assigns the LEIs. It is, by jurisdiction, the interface with the establishments and therefore the "regional" relay for the overall organisation.

During the implementation phase of the Global Legal Entity Identifier System (GLEIS), LOUs were considered as “pre-LOUs” and they have attributed interim LEIs named as “pre LEIs”. This situation is coming definitive when LOUs are officially recognized. More than 30 LOU are currently certified such as CICI Utility (DTCC USA), INSEE (France),WMdatenservice (Germany), London Stock Exchange (UK), Takasbank (Turkey)… to which new entities are regularly added when being endorsed by the ROC.

In France, the INSEE has been declared as "pre-LOU" on March 2013, the 18th based on the consideration that French administration will implement LEI through a correspondence between the SIREN code and the LEI with applicable fees according to the guidelines given by Ministry of Finance and Economy decree of June 2013, the 28th.
Two procedures exist for the assigning of LEIs or pre-LEIs (CICIs):

  • at the initiative of the entity concerned (Self Registration)
  • at the request of a third party (Third Party Registration). The counterparty that has an identifier assigned to it must verify the data. An LEI therefore has a status (certified or not certified). 

In December 2017, more than 700 000 LEI was distributed on more than 197 countries with an increase of 30% in a quarter.

Some topics are under further discussions such as hierarchy considerations between different legal entities or branch in the same group of company.

Current situation

  • June 2012 : During Los Cabos summit, G20 validated the Global Legal Entity Identifier System (GLEIS) in order to identify actors involved in the financial markets. This has open a Pre-LEI phase. In the USA as a consequence of the Dodd-Franck Act, several associations, financial institutions and the CFTC (US Commodity Futures Trading Commission) have entrusted DTCC and SWIFT with the assigning of unique identifiers used as an interim solution for setting up the LEI. This US pre-LEI is designated as CFTC Interim Compliant Identifier (CICI) and is already active. It has become mandatory in March 2013 for derivatives processed in the USA. Other countries put in place progressively their own organizations.
  • 6 February 2013: A launch group for the Market organisation concerning the LEI project in France revolving around a Technical Group for the market, which supervises six workshops, one of which addresses the migration of the CICI to the LEI.
  • 18 March 2013: INSEE declared as "pre-LOU"
  • March 2013: obligation to use the CICI for derivatives processed in the USA
  • 2nd Quarter of 2013: setting up of the administrative organisation
  • September 2013 : launch of INSEE service of on line demand in French for a LEI
  • December 2013 : launch of french INSEE service of on line demand in English for LEI
  • February 2014: EMIR imposed the LEI for trading some derivatives
  • 24 August 2014: publication of Articles of Law of GLEIF (Global LEI Foundation) founded in June
  • 7 September 2015  ROC issues a consultation paper on concept of group, branches…and data collections (deadine 19 October)
  • 30 September 2015 ROC defines conditions of attribution of LEI for specific professionals exercising as physical persons on Financial Markets.
  • 7 October 2015 ROC confirmer the GLEIF capacities to exercice its COU functions.
  • 19 October 2015 Consultation launched by ROC on taking in account in the GLEIS datas regarding branches (deadline 16 November 2015)

SGSS/SMI contact:
Pierre Colladon

Financial Transaction Tax

Reference textshttp://bofip.impots.gouv.fr/bofip/7561-PGP.html?ftsq=TAT&identifiant=BOI-TCA-FIN-10-20140115

(Texts are available only in French)

Date of application:

1st August 2012


The French Financial Transaction Tax (FTT), introduced by the 1st Amended Finance Law for 2012, published on March 15, has come into force on August 1st 2012. Administrative guidance was issued on August 2, and implementation decrees were published on August 7.

The FTT refers indeed to three different taxes: a tax on the acquisition of eligible French listed stocks (FTT-Stocks), a tax on high frequency trading (FTT-HFT) and a tax on “naked” CDS on EU sovereign debts (FTT-CDS).

The FTT-Stocks which rate was finally 0.2%, applies to acquisitions for consideration of listed shares of French companies whose market capitalization is over €1.bn on December 1st of the year before the year of taxation. Certificates representing registered shares (such as ADR, EDR) have been included in the scope of the tax through the 2nd Amended Finance Law.

The accountable party for the FTT-Stocks is the Investment Services Provider (ISP) executing the buy order. In case of several ISP, this is the one receiving directly the buy order from the buyer giving that it is agreed for the “Execution on behalf of clients”. If the buyer is itself an ISP, it is the accountable party. Finally, for acquisitions realized without the participation of any ISP, the tax is payable by the Custodian of the buyer. It is important to note that the definition of the accountable party has been notably changed a few days after the entry into force of the new tax requiring companies to review their process in order to be compliant with the new texts.

The FTT-Stocks is due irrespective of the the nationality of the ISP, those of the accountable party, the investor’s tax residency as well as the place of trading, the type of market or the place of settlement of the transaction. The tax is based on the acquisition value of the securities as expressed in the “contract”. The tax is due when the transfer of ownership is recorded. It is assessed on the daily net buying position for a same day. 9 cases of exemption are also part of the tax.

The payment of the tax jointly with the declaration file (of taxable transactions but also exempted ones) has to be done every month (excepted for the first three months) by the accountable party either directly or via a member of the CSD – most often to Euroclear France designated as the tax collector by the French Tax Authority.

The FTT-Stock is collected since the 1st of August 2012 (December 2012 for ADR transactions). Lending/borrowing transactions as well as exempted corporate actions with new issuance have to be declared (they are exempted) since the 1st of January 2013.

Amendments have been made both in June 2013 and January 2014 in order to clarify the original texts regarding the scope, the accountable party, the net position and to give some precision for UCITS.

Latest news:

A new amendment has been issued on the 1st of August 2014 in case of several ISP involved in the process. The accountable party used to be the one receiving directly the buy order from the buyer giving that it was agreed for the “Execution on behalf of clients”. Now under certain conditions the accountable party could be the ISP which actually executes the order.

Next steps

No real next steps (except precisions/amendments provided by the French Tax Authorities). The tax is in place and should remain until the go live of the European tax.

Learn more:

Many documents have been issued on this topic; the main are:

  • Euroclear France’s DSD (how to pay and declare)
  • The AFTI White Paper (more dedicated to member of EOC France)
  • An explanatory note from the AMAFI (for ISP)


SGSS/SMI contacts:
Sylvie Bonduelle

Date de dernière mise à jour : 01/08/2012



FATCA Legislation

Reference Text: US ‘Internal Revenue Code’ chapter 4 sections 1471-1474

Date(s) of Application:

01/01/2013 to 01/07/2013: contractualisation of agreements with the IRS (for application 2014)
01/07/2014: beginning of withholding tax application on US securities revenues
01/07/2014: start of due diligence for individuals
15/03/2015: beginning of reporting to the IRS
01/01/2015: start of due diligence for entities

01/01/2017: beginning of withholding tax on other US payments (gross proceeds …)


The American FATCA (Foreign Account Tax Compliance Act) voted on 18 March 2010 has the objective of reinforcing the fight against tax evasion of US taxpayers. It aims to require that foreign financial institutions (i.e. outside the US) report revenue paid to American taxpayers, thus enabling automated data cross-checking with the individual declarations of these taxpayers.

Participating Foreign Financial Institutions (PFFI) must therefore identify and document all accounts for clients susceptible of being US taxpayers. In the event that FFI’s governing state has concluded a cooperation agreement with the IRS, the PFFI status is acquired; if this is not the case, FFI must set up an agreement directly with the IRS.  It should be noted that management companies and UCITS are included in the scope of the financial institutions targeted by the FATCA.  Information about PFFI payments to US taxpayers must be sent on an annual basis to the Internal Revenue Service (IRS) either from their own tax authorities in the case of an inter-state partnership or directly to the IRS if such partnership does not exist. In the latter case, the IRS is asking PFFIs to deduct a punitive tax of 30% on all revenues and proceeds from assets from a US source, received directly or indirectly, intended for counterparties not having the status of PFFI and to “recalcitrant” clients, i.e. clients that may be US persons and having not offered evidence to the contrary , or having recognised their status as US person but having refused to withdraw banking secrecy.

In the event where a financial institution is not considered as a PFFI, it will itself be subject to an upstream deduction of a punitive tax of 30% on all payments from a US source (direct or indirect) that will be paid whether the final beneficiary of these revenues is itself or its clients.

Current Situation:

  • Update in march 2010 of internal Revenue Code” by the IRS further to the FATCA law.
  • Publication of several manuals during 2010-2011 and, on  8 February 2012, the regulation project which have been then amended again on 24 October 2012.
  • Publication on 26 July 2012 of the first Intergovernmental Agreement (IGA) model drafted by the IRS and several European states (France, Germany, the United Kingdom, Italy and Spain) explaining the partnership approach with bilateral exchange of  fiscal information.
  • Publication on 14 November 2012 of a second IGA model for countries that don’t require reciprocity from the IRS (only one-way communication of fiscal information to the IRS)
    Publication on 17 January 2013 of the final FATCA regulation.
  • Publication on 12  July 2013 of the notice 2013-43 announcing a delay of six months on key timelines and specifying the practical arrangements for the FFI during the period preceding the signing of an intergovernmental agreement between their country and the U.S.
  • Opening on 19 August 2013 of the FATCA portal for PFFI agreements registration.
  • Publication on  27 June 2014 of the new IQ agreement endorsing the coordination points with FATCA.
  • July 1, 2014: Start date of FATCA procedures for opening new accounts and for withholding tax on U.S. source payments.
  • January 1, 2015: Start date of FATCA procedure for opening new accounts for entities.
  • March 15, 2015: beginning of the first FATCA reporting

Next Steps
01/01/2017: beginning of withholding tax on other US payments (gross proceeds …)


SGSS Contacts:
Sylvie Clerbout
Alain Rocher

Find out more


Reference document: Dodd–Frank Wall Street Reform and Consumer Protection Act.

Applicability date



The Dodd-Frank Act approved on 21 July 2010 is a vast reform covering numerous aspects of US financial regulation. Like the recent European regulations, it targets 4 major issues (preventing systemic risk, regulating the derivatives markets, improving transparency, and increasing protection for consumers and shareholders).

The new regulations applicable to the OTC derivatives market are covered in Title VII of the Dodd-Frank Act; their oversight will mainly be handled by the two American regulators, i.e. the SEC for swaps and the CFTC for other types of derivatives. These regulations revolve around 3 main undertakings:

  • Reinforcing capital requirements and regulatory reporting for the main players on those markets, i.e. swap dealers and major swap participants.
  • The requirement to use clearing houses for certain categories of derivatives. The exact scope of the products concerned is still to be determined by the SEC and CFTC but should only include standardised OTC products, thus excluding swaps and forward foreign exchange contracts.
  • The requirement to submit reports to central Swap Data Repositories (SDR), via clearing houses for cleared products, and directly for non-cleared products. This reporting will need to be done in real time for derivatives transactions, whether cleared or not, in order to make price and volume data available to the public as soon as possible after the transactions.

The clearing and reporting requirements also apply to non-US persons involved in derivatives transactions with US persons.

Current situation

  • 28 November 2012: the CFTC published the final clearing rules
 for certain types of swaps (credit default swaps and interest rate swaps).

31 December 2012: start of registration for swap dealers and major swap participants
 start of reporting for interest rate swaps and credit swaps
  • 28 February 2013: start of reporting for derivatives relating to equities, foreign exchange and commodities
  • 11 March 2013: start of clearing requirement for swap dealers and major swap participants;
  • 4 October 2013: reporting requirement extended to all derivatives market participants

SGSS/SMI contact
Alain Rocher

Shadow Banking

Text of reference: Consultation du FSB on shadow banking from 18 November 2012


The Financial Stability Board (FSB), created in April 2009 by the G8, has defined « Shadow Banking » as a system in parallel of credit intermediation, activity traditionally the preserve of banks. It involves entities and activities outside the traditional banking system.

According to the FSB, economic systems adopted by this finance in parallel allow it being governed by a different regime from traditional banking activities in particular controls or taxation. Further to the FSB Report, Shadow Banking would take mainly 2 forms which are securitization and the development of the High-yield Bond market.

But this term «Shadow Banking» covers also activities like securities lending and repos and more widely activities carried out by Money Market Funds and other investment funds (capital investment, hedge funds, etc ..)

Right or wrong politicians and regulators have considered that Shadow Banking activities had played a crucial role in the financial crisis of 2008, deriving from real economy money from traditional banking system.

The report of the FSB estimated the banking system in parallel to USD 67 000 billion allocated between USA (USD 23 000 billion), the EURO zone (USD 22 000 billion) and the UK (USD 9 000 billion). In 2011 cumulated assets of the sector would represent 111% of the aggregated GDP of G20 countries and 25% of assets of the financial sector.

USA, the euro zone and the UK hold together 81% of these non banking assets. The FSB Report unveils a strong growth of some Shadow Banking activities in emerging countries: China, ’Indonesia and Russia.

Past Events

  • 2010 – The Financial Stability Board (FSB), mandated by G20 to issue recommendations to strengthen oversight and regulation of the Shadow Banking.
  • 19 March 2012 - Green Paper of the European Commission on Shadow Banking.
  • 18 November 2012 - The FSB published a series of recommendations to strengthen oversight and regulation of the Shadow Banking. Comments were expected for 14 January 2013.
  • 20 November 2012 - The European Parliament voted a resolution aimed at improving the shadow banking regulation.
  • 28 January 2013 – FSB was set up as an association under Swiss Law.
  • 29 January 2013 - The FSB published replies received to the 4 reports published on 18th November 2012. These answers will contribute to finalize recommendations of the FSB by September 2013.
  • June 2013 – The SEC published its consultation (700 pages)on Money Market Funds (3 months) http://www.sec.gov/rules/proposed/2013/33-9408.pdf
  • 29 August 2013 – The FSB publishes 3 new reports including recommendations to address Shadow Banking risks in the securities lending & repo activities
  • 4 September 2013 – The European Commission (EC) publishes a draft regulation for money market funds out of the scope of the UCITS 4 Directive
  • 29 January 2014 – The EC adopted a proposal for a regulation to stop the biggest banks, TBTF (*) from engaging in proprietary trading and to give supervisors the power to require those banks to separate other risky trading activities from their deposit-taking business.
  • This proposal provides a set of measures aiming to enhance regulators’ and investors’ understanding of securities financing transactions (STFs). These transactions have been a source of contagion, leverage and procyclicality during the financial crisis and they have been identified in the Commission’s Communication on Shadow Banking as needing better monitoring
  • In parallel of this reform, the EC imposes the transparency of some transactions in the shadow banking sector (And in particular operations of securities/lending activities because they enter the scope of  SHADOW BANKING).  If this  reform is adopted, it would impose to UCITS and AIF a reporting of financing operations on securities.

Situation as of today

The EC received lots of comments on the draft regulation as of 4th September 2013. More than 800 amendments have been made to the Bill. But no approval has been reached within ECON and project has not been submitted to the European Parliament in April 2014. We need to wait until September to see how this project will be reactivated by the new Rapporteur within ECON Commission.

In March 2014, the European Commissioner Michel Barnier indicated that securitization could be re-visited, in particular for pushing the growth in Europe, if it is well designed with a regulatory framework

At international level after G20 summit of St Petersburg in September 2013, the FSB will render an account to the G20 in November 2014 on progress made regarding different actions planned within its recommendations/publications.

Regarding the draft banking reform published on 29 January 2014, possible impacts on our business remain to be identified, even if it is still difficult at this stage, in the absence of a vision clear and precise.

Finally the SEC has published its new rules on Money Funds on 23rd July 2014. These rules might influence new discussion on MMF European regulation draft.

To know more

Contact SGSS/SMI
Jean-Pierre Gomez

(*) TBTF: Too big to fail

Money market funds

Right or wrong, Money Market Funds have been considered as entities linked to the banking system in parallel so-called SHADOW BANKING. Shadow banking has been defined by the Financial Stability Board (FSB), created in April 2009 by the G20, “as a system in parallel of credit intermediation, activity traditionally reserved to banks. It involves entities and activities outside the traditional banking system”.

However these money market funds are an important source of short-term financing for governments, corporates and also for banks of the euro zone.

This is mainly for this reason that the European Commission decided to reinforce the regulatory framework of these MMFs already submitted to UCITS or AIFM directives by proposing in September 2016 a regulation dedicated to these MMFs on top of those directives. 


  • MMF key figures:
  1. European MMFs have assets around € 1.1 trillion.
  2. 50% of C-NAV MMFs (65% since the last IOSCO Report).
  3. France, Ireland and Luxembourg domicile 85% of assets of European Money Market Funds.
  4. Money Market Funds represent 15% of investment fund assets in Europe.
  • Main topics of the Regulation :
  1. Capital buffer of 3% definitively removed.
  2. External support is prohibited.
  3. 2 types of CNAV: Public Debt CNAV (invest 99.5% in government securities) and the low volatility NAV MMF - LVNAV MMF (invest in high quality of assets with a low volatility).
  4. Wide range of asset eligibility (including securitization and asset-backed commercial papers) with stricter diversification rules and investment limits.
  5. New liquidity ratios.
  6. More transparency in terms of information and reports for both investors and regulators, set up of stress tests scenarios, internal credit assessment for counterparty risk management and new tools to deal with “know your customer” rules in the sense of knowing their likely redemption requirements, rather than AML.
  • Issues discussed :
  1. Capital buffer of 3% has been abandoned and would have cost € 18 billion to asset managers. It has been replaced by liquidity fees/redemption gates largely inspired form the US MMF Reform.
  2. Shall we keep CNAV funds knowing that they have been accused of misleading investors who thought that they had same guarantee offered by a time deposit?
  3. Luxembourg and Ireland have CNAV MMFs while only VNAV MMFs are allowed in France.
  4. Do MMFs and in particular CNAV MMFs need to be regulated like banks while they already comply with other regulations and operate under a solid legal framework?
  5. European MMFs comply with either UCITS Directive or AIFM Directive. UCITS label is a brand well recognized in Europe and outside Europe, especially in Asia for instance. Did it make sense to propose this new Reform exclusively dedicated to MMFs only?
  6. MMFs are shadow banking entities as highlighted by the European Banking Authority in its consultation as of March 19, 2015, or non-banking entities as evidenced by the general consensus emanating from players of the financial industry. Therefore they are risky financial products that had to be better regulated.
  • Next steps :
  1. The Regulation will enter into force 20 days after its publication and will apply to new MMFs 12 months after that date (21 July 2018). Existing MMFS will have 18 months to comply (21 January 2019).
  2. Non European MMFs sold to European investors will also have to comply with this new MMF Reform.
  3. ESMA published a consultation paper focusing on risk management and stress tests scenarios. Replies were expected by 7th August 2017. Implementing technical standards and remaining delegated acts will be adopted by the Commission in the first half of 2018.
  4. ESMA published its roadmap on MMFs rules on 15 January 2018 leaving the financial industry until 12 February 2018 to provide any comment. One new item remains the use of Securitization in line with criteria laid down in December 2017 for a simple transparent standardised securitisation. The EC informs
  5. ESMA on 19 January 2018 that share cancelation is not compatible with the Regulation.
    New guidelines published in March 2018 by ESMA regarding stress tests scenarios under art. 28 of the Regulation.

Chronology of events

  1. 4 September 2013: Publication by the EC of a project to regulate all MMFs in addition to UCITS IV and AIFM directives.
  2. 29 April 2015: Approval by the European Parliament of the draft regulation of the European Commission of 4 September 2013.
  3. 30 April 2015: Possibility for ECON to start Trialogues in the event of agreement of the council about the proposal, but the Latvian Presidency of the Council of the EU and that of Luxembourg did not wish to deal with the reforms.
  4. 5 April 2016: Decision of the EU Council to re-launch discussions on this reform of the MMFs by issuing a 4th compromise.
  5. 10 May 2016: the Council of the EU published a new and 5th compromise with changes about the holding of ancillary liquid assets and the use of asset-backed securities/ commercial papers.
  6. 15 June 2016: The EC welcomes the agreement reached on the final text of the MMF reform (version of the 5th compromise) that same day reached the Permanent Representatives Committee of the Council (COREPER).
  7. 16 November 2016: The Trialogue process is over. A final agreement has been reached.
  8. 5 April 2017: Parliament voted in first reading to adopt the final text of the regulation.
  9. 16 May 2017: Council adopted the MMF regulation followed by the text signature.
  10. 30 June 2017: Publication in the Official Journal of the EU with an entry into force on 20 July 2017.

Reference text(s) and date of entry into force


Contact SGSS/SMI
Jean-Pierre Gomez

European Long-Term Investment Funds (ELTIFs)

Reference documents : Regulation 2015/751 on European Long-Term Investment Funds of 29 April 2015 (OJEU L 123/98 19.5.2015)


On 26 June 2013 the European Commission adopted a proposal for a full harmonisation regulation that would create a new financing vehicle, the ELTIF, for professional/institutional investors (insurance companies, pension funds etc.) that wish to place their capital in long-term infrastructure companies and projects in exchange for regular returns and for retail investors wishing to save for their retirement.


The measure was initially discussed by the various stakeholders during the UCITS VI consultation launched by the Commission on 26 July 2012. It was also announced by the Commission in its Green Paper on the Long-Term Financing Of The European Economy, open for consultation until 25 June 2015. While the proposal targets investment funds and the Green Paper is wider in scope, it is surprising, despite the discussions undertaken during the UCITS VI consultation, that the Commission did not wait for an analysis of the results of the Green Paper consultation before publishing this proposal.

Content of the EC proposal

  • Link with the AIFMD (like the EuVECA and EuSEF regulations): an ELTIF fund is an AIF domiciled in the EU and managed by an authorised manager in the terms of the AIFM Directive. Unlike this Directive, the ELTIF regulation sets product rules applicable to AIFs that correspond to the characteristics of ELTIFs.
    → All the rules of the AIFM Directive apply to ELTIF managers, including the need to appoint a depositary
  • European passport for management and products (in the terms of the AIFM Directive) /No system for marketing in other countries (unlike the AIFMD)
  • Eligible assets : at least 70% of the capital (aggregate capital contributions and uncalled committed capital) of the ELTIF must consist of:
    • equity or quasi-equity instruments issued by a qualifying portfolio undertaking, debt instruments issued by qualifying portfolio undertaking and/or loans granted to a qualifying portfolio undertaking by the ELTIF
    • shares or units in EuVECAs or in EuSEFs or in other ELTIF, provided that those funds have not themselves invested more than 10% of their capital in ELTIFs
    • Direct holdings of individual real assets requiring up-front capital expenditure of at least 10M EUR at the time of the expenditure / acquisition (e.g. infrastructure, property, ship, aircraft, rolling stock etc.)

→ UCITS-eligible assets under the terms of UCITS IV (money market instruments, transferable securities admitted for trading on a regulated market or MTF, sovereign securities), which must not represent more than 30% of the ELTIF's capital

→ ELTIFs are prohibited from short selling of assets, exposure to commodities, securities lending/borrowing agreements, repurchase agreement and using financial derivative instruments (except to hedge the duration and exchange risks)

  • A qualifying portfolio undertaking:
    • Is not a collective investment undertaking
    • Is not admitted to trading on a regulated market, MTF or OTF
    • Has its head office in the EU or in a third country that is not on the FATF blacklist
    • Is not a financial undertaking, except a company dedicated to financing infrastructure projects or acquiring/developing/building real assets
  • Ratios for the composition of an ELTIF portfolio (diversification ratios):
    • Investing at least 70% of the capital committed in eligible assets. Period of 5 years from authorisation for compliance with the 70% ratio.
    • Investing no more than 10% in assets issued by any single qualifying portfolio undertaking (a)
    • Investing no more than 10% in an individual real asset (b)
    • Investing no more than 10% in units or shares of any single ELTIF, EuVECA or EuSEF
    • Investing no more than 5% in UCITS-eligible assets where those assets have been issued by any single body
    • The aggregate value of units or shares of ELTIFs, EuVECAs and EuSEFs in an ELTIF portfolio shall not exceed 20% of the value of its capital
    • The aggregate risk exposure to a counterparty of the ELTIF stemming from over the counter (OTC) derivative transaction or a reverse repurchase agreement shall not exceed 5% of its capital
    • As an exception, an ELTIF may raise the 10% limit in (a) and (b) above to 20% if the cumulative value of the assets held by the ELTIF in qualifying portfolio undertakings and in individual real assets exceeding the 10% ratio does not exceed 40% of the capital committed (value of its capital)
  • Limits on concentration: for the ELTIFs, EuVECAs and EuSEFs in which an ELTIF invests, an ELTIF may not hold (acquire) more than 25% of the capital of a single ELTIF, EuVECA or EuSEF. No limit on concentration for other eligible assets.
  • Leverage (borrowing of cash): an ELTIF may borrow  cash up to 30% of its capital as long as this borrowing serves to finance the acquisition of a participation in eligible assets, is contracted in the same currency as the assets to be acquired and it does not hinder the realisation of any assets held in the portfolio of the ELTIF or does not encumber the assets held in the portfolio of the ELTIF.
  • Marketing to retail investors (additional requirements): the fund rules must contain a principle of equal treatment for all investors, the ELTIF may not be structured as a partnership and retail investors may during the subscription period and at least two weeks after the subscription, cancel their subscription and have the money returned without penalty.
  • ELTIF = Fund closed to repurchases: redemption, trading and issuance of ELTIF shares or units and distribution of income
    • Investors must not have a right of redemption before the end of the fund's life. The life of the ELTIF must be specified in its rules or instruments of incorporation and must cover to the life-cycle of each of its individual assets and its long-term investment objectives; redemption shall always be possible in cash. Redemptions in kind subject to conditions
    • Subscription (issuance of new shares or units) is possible during the fund's life cycle, but no subscriptions below the net asset value can be accepted without a prior offering at that price to existing investors (preference right)
    • ELTIF shares or units may be admitted to trading on regulated markets and transferred freely to third parties
    • Rules on the distribution of income generated by the ELTIF's assets, obliging the fund to indicate its distribution policy in its rules
  • Transparency obligations (in accordance with the Prospectus Directive and the PRIIPS KID): prior publication of a key information document and a prospectus.

ESMA Consultation paper 31/07/2015 : answer sent on 14 October 2015

  • Draft RTS (regulatory technical standard) to determine:
    • The criteria for establishing the circumstances in which the use of financial derivative instruments solely serves hedging purposes
    • The circumstances in which the life of the ELTIF is sufficient in length
    • The assessment of the market for potential buyers
    • The criteria for the valuation of the assets to be divested
    • Definitions and calculation methodologies of costs
    • Specification of the facilities available to retail investors

Previous steps:

  • 26/6/2013: Publication of the EC proposal

  • 13/11/2013: EP draft report

  • 20/11/2013: deadline to table EP amendments

  • 10/03/2014: ECON vote

  • 20/03/2014 and 24/4/2014: 1st and 2nd compromise from Greek Presidency

  • 17/04/2014: partial vote in plenary

  • 23/05/2014 : 3rd compromise

  • 4/6/2014 : 4th compromis

  • 20/6/2014 : Council General Approach adopter by COREPER

  • 12/10/2014 and 5/11/2014 : Trilogues

  • 26/11/2014 : Agreement in  Trilogue.

  • 5/12/2014: Final text sent to the COREPER for final approval by EP and Council

  • 10/12/2014: formal approval by COREPER

  • 15/12/2014: Presentation of the final text to ECON

  • 10/03/2015: Final adoption by the EP in plenary

  • 20/4/2015: Formal adoption by Council

  • 19/5/2015: Publication in the OJEU.

  • 14/10/2015: Answer to the consultation paper on draft RTS published on 31/07/2015

  • 9/12/2015 : Implementation date of the regulation

  • 08/06/2016: The European Securities and Markets Authority (ESMA)  published draft Regulatory Technical Standards (RTS)

Next step:

  • European Authorities have to accept or modify these Regulatory Technical Standards

SGSS/SMI contact:
Marie - Claire de Saint - Exupéry


Reference text: Directive 2002/47/EC on collateral agreements

Date of effect

27/06/2002 (date publication of publication in OJ)


The objective of the “Collateral” Directive is to institute a minimum community legal framework aiming to limit the credit risk in financial transactions through constituting collateral with either constitution of surety or transfer of property, and relating to cash, financial instruments and, since 6 May 2009, private claims.  The personal scope of the “Collateral Directive” is limited however to collateral agreements entered into between a collateral creator and a collateral taker which both belong to one of the following categories: public authorities; public sector organisations; central bank; or financial institution subject to prudential surveillance (including coordinated UCITS).  The Collateral Directive aims to ensure the effectiveness of collateral agreements by requiring Member States to recognise the effectiveness of this collateral both by limiting the formal requirements that can be provided by the national laws as conditions of validity or enforceability of collateral agreements and by providing swift and informal execution procedures.

The directive also stipulates that certain provisions on insolvency are not applicable.  A collateral agreement cannot be declared null and void or be cancelled solely due to the fact that it has been entered into or the assets have been constituted as collateral:
- on the day of winding-up proceedings are instigated or streamlining measures are taken, but before delivery of an order or judgment to this end;
- during a period determined before instigation of winding-up proceedings,
The text also provides the law applicable in the event of conflict of laws.  The law applicable to the collateral agreement, and notably the rules of enforceability on third parties, is determined by that of the place of location of the account in which the securities given as collateral are registered

The “Collateral” Directive was modified by Directive 2009/44/EC to integrate private claims as collateral for cross-border transactions as since 1 January 2007 the Central European Bank has recognised private claims of professionals as collateral admissible for credit operations of the Eurosystem.

Current situation

  • 27 June 2002: publication of Directive 2002/47/EC known as the Collateral Directive
  • 6 May 2009: publication of Directive 2009/44/EC modifying Directive 2002/47/EC

Next steps

  • Not applicable

SGSS/SMI Contact
Alain Rocher
Sylvie Bonduelle

FINALITY Directive

Reference text: Directive 98/26/EC on settlement finality in payment and securities settlement systems.

Date of effect

11/06/1998 (date of publication in OJ)


The Directive on settlement finality adopted in May 1998 applies to payment and securities settlement systems and to any participant in this system.  This regulation mainly strives to eliminate the legal factor of the “systemic risk” inherent to these systems, i.e. the risk that the failure of one counterparty does not entail the failure of other participants, or even the system itself: to this end, it enables the continuation of execution of payments initiated before an insolvency and prevents retroactive cancellation of payments.  It also applies to collateral constituted within the framework of the participation in a system, and to operations of the central banks of the Member States in their capacity of central banks.

The Finality Directive defines the payment system as a formal agreement, entered into between at least three participants (mainly credit institutions) to which may be added a settlement organisation (for final accounting of the said settlements), a central counterparty or a clearing house, comprising common rules and standardised procedures for the execution of settlement/delivery instructions between participants.

The “Finality” Directive was modified on 6 May 2009 by Directive 2009/44/EC in order to extend its scope and improve protection in a context of development of links between payment and settlement/delivery systems.  Initially, the systemic risk was considered only to be able to result from banks executing payments directly in the system.  The financial crisis demonstrated that other entities participating indirectly in systems could also create a systemic risk (investment firms, central counterparties).  The protection of operations in the event of insolvency is also henceforth extended to cover not only payment orders made between the participants in a system, but also payment orders made from system to system.  The protection of transfers between systems was in fact not sufficient since the times of transition from one system to another and the times of irrevocability of transfer orders in each of the systems were not themselves coordinated.

Current situation

  • 19 May 1998: adoption of Directive 98/26/EC known as the Finality Directive
  • 6 May 2009: adoption of Directive 2009/44/EC modifying Directive 98/26/EC

Next steps

  • Not applicable

SGSS/SMI Contact
Alain Rocher
Pierre Colladon

Recovery & Resolution (For non banks)

Reference Text : FSB, CPSS-IOSCO consultations, future European legislation






Dates of application: depending on the body


Last financial crisis has shown that the default of a participant if only it is a big player may lead to severe systemic disruptions. During the G20 (2011 Cannes), the Financial Stability Board (FSB) has been asked to work on measures that could be undertaken to handle the resolution process of a financial institution. In November 2011, the G20 endorsed the « Key Attributes of Effective Resolution Regimes for Financial Institutions » issued by the FSB.

Some of these entities considered as systemic like Financial Market Infrastructures (Central Counterparties – CCP-, Central Depositaries – CSD-, Settlement Systems – SSS, Payment Systems or Trade Repositories) play an essential role in the global economy so that their default could not end up just trough a bankruptcy/insolvency process since those regimes do not have the preservation of financial stability as an objective but are rather focused on the creditors.

For such entities, man need to have in place a legislation which allows them to maintain their critical services despite everything; this is the purpose of these Recovery & Resolution plans. This is will be more significantly needed with the entry into force of the first clearing obligations coming from legislation on OTC derivatives, another commitment of the G20. EMIR (the European regulation on OTC derivatives) foresees indeed that a clearing obligation of a specific product may be decided as of there exists at least one CCP agreed under EMIR and ready to clear the product.
If the recovery phase consists for the entity to take measures through the use of dedicated tools, when the entity is under a resolution process (the step further) it has been taken over by the resolution authority (including national competent authorities). Such an authority may be allowed to use extraordinary measures (even outside the common law).

Recovery and of course Resolution are linked to period in the life of an entity where it cannot anymore face consequences of major difficulties even through a Business Continuity Plan. At this stage, most of the time financial losses are involved that must be covered to let the entity maintain its services. The aim of most of the recovery/resolution tools is to allocate those losses either to participants or to shareholders rather than exposing taxpayers to loss. For example, in the case of a FMI, the allocation would depend on the origin of the difficulty; should it be due to the default of a member then tools will concern other members; if not losses will have to be covered by the FMI itself and its shareholders.
It has to be noted that the European Union has already worked on this topic of Recovery and Resolution where entities are banks considered as systemic ones.

For more information please refer the European Parliament (Legislative Observatory); links are indicated in the Link paragraph of this document

Latest News

Dietrich Domanski (Secretary General of the FSB) has announced at the Eurofi meeting (26/04/2018) that the FSB will deliver to the Buenos Aires G20 summit (scheduled on the 30th of November – 1st of December 2018) an assessment to determine whether there is a need for additional guidance on financial resources to support CCP’s resolution and on the treatment of CCP equity in resolution. To be reminded the FSB issued guidance on CCP Resolution and Resolution Planning in July 2017.

On its side CPMI-IOSCO has issued two guidance documents also in July 2017: a revised version of the “Recovery of financial market infrastructures” (dated October 2014) and its final report “Resilience of central counterparties (CCPs): Further guidance on the PFMI”.

These 3 publications completed the key substantive priorities set out in the joint CCP Workplan for 2015.

To be noted, ISDA has issued recommendations on the CCP recovery and resolution, framework (see the Link §)

On the 28th of November 2016 the European Commission has issued a draft regulation on a framework for the recovery and resolution of CCPs. The main points of this proposal are the requirement for recovery and resolution plans, the ability for the CCP supervisors to intervene at a sufficiently early stage in a CCP (before the deterioration becomes irreparable), the designation of resolution authorities as well as the definition of tools they can use and finally the cooperation between resolution authorities.

To be noted, the three EU Institutions (the European Parliament, the Council and the European Commission) have committed to agree each year on a number of priority proposals, to which they want to ensure substantial progress. These priority proposals are included in the so-called Joint Declaration on the EU's legislative priorities. The Recovery and Resolution for CCPs proposal is in the 2017 list as well as in the 2018 list.

  • the Council of the EU: after a first compromise proposal (8612/17) on certain elements of the proposed Regulation, the Council has published a second version of a compromise on the 19th of December 2017
  • At the European Parliament: awaiting Parliament first reading; the EP took the decision to enter into interinstitutional negotiations (08/02/2018)

ESMA which has issued in April 2017 its comments on the European Commission’s proposal (see the Link paragraph) intends according to its workplan for 2018 to consult on different topics in relation with the EC’s proposal (for future RTS):

  • Content of the resolution plan
  • Valuation of the assets, liabilities, rights and obligations of the CCP
  • Written arrangements and procedures for the functioning of the resolution college
  • Valuation of the No credit worse off

Also in 2018, ESMA will continue its preparatory work on guidelines (one on conditions for entry into resolution of CCPs, one on the content of cross-border cooperation arrangements for CCP resolution)

The ESRB published its own opinion in July 2017 whereas the ECB did it in September 2017.

Main passed steps

In June 2012, CPSS and IOSCO published a first consultation on the « Recovery and Resolution of Financial Market Infrastructures », and in August 2013 an added document detailing recovery tools than could be used by a FMI. These two consultations are in line with the Key Attributes du FSB as well as with the « Principles for Financial Market Infrastructures » issued in April 2012 by CPSS IOSCO.

Also in August 2013 (same day) the FSB issue its own consultation aiming at reinforcing/completing its Key Attributes for FMIs or Assurance companies and also in the prism of the client assets protection, the « Application of the Key Attributes of Effective Resolution Regimes to Non-Bank Financial Institutions » which despite its name concerns also credit institutions.

At the European level, work started since 2010 and, after having worked on Recovery and Resolution plans for credit institutions and investment firms, the Commission has in November 2012 published a « Consultation on a possible recovery and resolution framework for financial institutions other than banks », and in October 2013, a « Discussion Paper on CCP recovery and resolution » (which is a not a public consultation); the same type of paper is foreseen for CSDs.

To be noted: until now the European approach was to make a distinction between banks and non banks what posed a dilemma for CCPs that as LCH.Clearnet SA or Eurex have a bank status and would have been submitted to the bank regime rather than the FMI’s one. Last document shows that such approach is evolving.

At the end of 2013, it was not less than half a dozen of consultations that have been issued between 2012 and 2013.

FSB (on the resolution of FMIs) and CPMI/IOSCO (on recovery of FMIs) have both published their recommendations on the 15th of October 2014.

In August 2016 the FSB issued a discussion note dedicated to CCPs regarding essential aspects of their resolution planning (objectives, strategy, timing, tools,…). The consultation was closed on the 17 of October. Based on the feedbacks received FSB planed to develop proposals for more granular guidance by early 2017 whose aim will be to complete the « Key attributes of effective resolution regimes for financial institutions » published in October 2014. It should be noted that this document is not limited to CCPs.

The European Commission has published for information a roadmap 2015 related to Recovery & Resolution for CCPs in which is announced that an impact assessment is currently being developed built among others on the answers it received on its 2012 consultation and outcomes of experts groups.
BCBS and CPMI/IOSCO (on recovery of FMIs) have discussed potential acceleration of their work and are aiming to issue policy recommendations for public consultation starting in mid-2016. The Resolution Steering Group of the FSB has also accelerated its part of the work on CCP resolution, and is set to deliver first conclusions around the same time.
On the 9th February 2016, the Commission has announced a delay on the publication of its proposal in order to align with the work on going at the international level.

Next steps

2018 (UE)

EU process following the CE proposal
ESMA’s consultations

2018 (INT)

IOSCO & FSB to publish their guidance / recommendations


SGSS/SMI contact
Sylvie Bonduelle

Securities Financing Transactions (SFT)

Reference text: Regulation (EU) 2015/2365 of the European Parliament and the Council on the transparency of securities financing transactions (SFTs) and of reuse.


The 2008 global financial crisis revealed significant holes in the regulation of the financial system. It also highlighted the need to improve transparency and monitoring not only in the traditional banking sector, but also in the sectors where non-banking credit activities take place, which is known as the “parallel banking system” and named SHADOW BANKING.

In order to closely follow the market trends concerning entities whose activities can be considered as pertaining to the parallel banking system, in particular in the area of securities financing transactions, the Commission feels it is necessary to implement transparency obligations.

The proposed regulation concerning the structural reforms of the banking sector of the EU which accompanies this proposal is the last piece of the new regulatory framework, which guarantees that even the biggest banks within the EU will become less complex and able to be the subject of an effective resolution with minimal consequences for taxpayers.

According to the EC, an obligation for reporting via trade repositories could remedy the problems found.

The securities financing transactions in the parallel banking system would thus be subject to appropriate surveillance and regulation.  Their use would not be prohibited or limited by specific restrictions as such, but would benefit from increased transparency.

The securities financing transactions targeted by this regulation are transactions of the parallel banking sector which principally comprise:

  • The repurchase agreement or repo;
  • Securities lending;
  • The buy-sell back and sell-buy back transactions;
  • And the margin lending transactions.

For UCIs: The periodic reports that the undertakings for collective investment in transferable securities (UCITS) management companies or UCITS investment companies and alternative investment fund managers must currently produce (beyond the AIFM and UCITS V directives) would thus be completed by this additional information on the use of securities financing transactions and other equivalent financing structures.

One of the major key points of this proposed regulation was the introduction of governance of rehypothecation by fixing minimum conditions to be respected during transactions by the parties concerned, such as the existence of a prior written agreement signed by the counterparties, total respect for the conditions of this agreement, full information on the potential risks in the event of default of a counterparty, and the prior transfer of the collateral to the account of the counterparty.

In the last version of the draft Regulation, the Italian Presidency of the EU had decided to replace RE-HYPOTHECATION by RE-USE. But the definition of re-use and SFT, which go beyond securities lending operations and/or repos, remains vague and unclear. Moreover the collateral term is not defined in the relevant regulation.


  • 29 January 2014 – The European Commission published its banking reform aiming to impose new rules to prevent the biggest and most complex banks, TBTF (Too big to fail) from practising trading on their own account, a risky market activity implying a structural reform of the European banking sector and measures aiming to increase transparency of certain transactions in the parallel banking sector.
    Alongside this reform, the European Commission imposes the transparency of certain transactions in the parallel banking sector (and notably securities lending/borrowing transactions because they pertain to SHADOW BANKING).
  • 23 March 2015: Vote in ECON Commission.
  • 27 April 2015: Vote in plenary session at the European Parliament.
  • 17 June 2015: Political agreement on the final compromise during trilogue as of 17 June 2015.
  • 26 June 2015: UE Council publishes the entire final compromise.
  • 29 October 2015: The European Parliament adopts the European Commission.
  • 16 November 2015: Council vote.
  • 23 December 2015: Publication in the EU Official Journal.
  • 12 January 2016: Entry into force of the regulation even if most of the provisions will be applicable after a certain period.
  • 11 March 2016: ESMA publishes a consultation paper (187 pages) on the SFT regulation. Answers were expected for 22 April 2016. It concerns exclusively data regarding reporting. There is nothing with regard to art. 15 (Reuse of collateral).
  • 31 March 2017: ESMA published its final report regarding RTS as well as some changes for EMIR.
  • October 2017: ESMA published an excel spreadsheet with a set of rules to be applied by the Trade Repositories. It follows the EMIR validation rules and it is based on the draft RTS published by ESMA on 31 March 2017. Deadline for answering is 10 November 2017
  • All SFTR should be fully live around March/June 2019

The three main measures of this Regulation

  • Obligations regarding re-use of assets (art.15): They have been less stringent and will depend on the outcome of the working group dedicated to re-use and leaded by the FSB. Collateral & master agreements must reflect new provisions contained in the regulation (client consent granted for transferring or no entitlement). Provisions came into force on 13 July 2016.
  • Information to investors (art.14): Current UCIs have 18 months (13 July 2017) to update pre-contractual documents like the prospectus. However for art.13 (annual & half-yearly financial reports) it was 13 January 2017. UCIs closing before the date of 13 January 2017 had to include new information listed in Annex section A of the regulation.
  • Compulsory notification of SFT (art.4): It will start between 12 and 21 months after the date of entry into force of the RTS. Those RTS that had to be submitted by ESMA to the European Commission by 13 January 2017 have been published on 31 March 2017. We can expect some guidance from NCA in terms of calendar and wait for trade repository names before starting the testing implementation process. One of the challenges is to clarify precise type of assets entering the scope of this SFT Regulation..

SGSS/SMI Contact
Jean-Pierre Gomez




Reference elements: Proposal of 9 April 2014 amending the following legislations:

Directive 2007/36/EC on the rights of shareholders

Directive 2013/34/EC on the obligations with regard to financial state and transparency

The legislation is a revision of a previous Directive published on April the 3rd:

Main rapporteur (Legal Case) COFFERATI Sergio Gaetano

Rapporteur for ECON Opinion (Economic and Monetary Affairs) LUDVIGSSON Olle

The proposed review stems from a consultation undertaken through two green papers (" Corporate governance in financial institutions " and " corporate governance framework in the EU ").

Date(s) of entry into force: May 2017 with 24 Months or transposition

The publication at Journal Officiel of European Union (May 2017) lead to an entry into force 20 days after (10 June 2017). The States will have from 24 months after publication to transpose the legislation into national law (10 June 2019). Some topics related to interaction between shareholders and issuers will be followed by technical implementation standards that shall be published 15 month after the publication of the amended Directive (10 September 2018) leading to a deadline of implementation at national level 24 months later (September 2020).


This proposed Directive aims to encourage long-term investment by the shareholders and to increase transparency between investors and corporations.

It amends Directive 2007/36/EC which deals with the rights of shareholders to improve the governance of corporations listed on the European Union stock exchanges and strengthens their competitiveness and viability in the long term. It supervises the exercise of certain shareholders' rights on shares with voting rights particularly at General Meetings (GM). Its objective is the companies admitted for trading on a regulated market established or operating in the European Union and whose registered office is in a Member State. The proposal puts emphasis on non-resident shareholding which represents 44% of shares listed in the EU.

The proposal deals with five major topics:

  • enables listed companies to identify their shareholders, to compel intermediaries to send information and to facilitate the exercise of shareholders' rights;
  • the mandatory transparency of the voting, the commitment of the institutional investors and asset managers and certain aspects of the asset management contracts;
  • the disclosure of the company's remuneration policy together with shareholders' voting rights;
  • increased transparency and an independent opinion on the related parties' transactions, and the submission of the largest transactions for the shareholders' approval;
  • the obligation, for the proxy advisers, to provide information on their working methods and to be capable of transparency where there are conflicts of interest;

On European Parliament initiative, amendments imposing obligation for companies to publically report on their tax payment in Europe, have been added.

1: The proposal enables a listed company to identify its shareholders, to compel the intermediary to send information and to facilitate the investor exercising his rights. (September 2020 provided implementing acts publication on 2018 September the 10th)

Identification of the shareholders (Section 1a Article 3a) concerning bearer shares:

  • the States make sure that the intermediaries offer companies the facility of identifying their shareholders so that they may exercise their rights;
  • The introduction of the concept of undue delays, the obligation is to send the shareholder's name and contact details and the unique identifier (LEI type) if there is one.
  • Where there is a chain of intermediaries, the same concepts apply for transmission
  • The intermediary must inform the shareholder if the company is in a position to identify him. He is described (article 2) as a legal person who holds securities accounts for his clients.
  • Point 4 of Article 3 makes it possible to override banking secrecy. It provides that the States ensure that an intermediary is not considered to be infringing a restriction on passing on information provided contractually or by a legislative provision.
  • The Commission shall lay down the formats and the deadlines by implementation decree.

Sending information (article 3b):

With regard to bearer shares, the intermediary must:

  • inform the shareholder to enable him to exercise his rights stemming from the shares (OST, AG)
  • this implies the company's obligation to provide the said information upstream
  • The Commission shall lay down the formats and the deadlines by implementation decree.

To facilitate the investor exercising his rights ( Article 3c)

  • (1) the intermediary takes whatever measures are necessary to enable the shareholder to exercise his rights particularly with regard to AG.
  • (2) in return, the issuer must confirm to the shareholder the vote cast
  • The Commission shall lay down the formats and the deadlines by implementation decree.

Transparency of the costs (Article 3d)

  • The intermediary has the right to fix a price the related services
  • These prices must be "proportionate" and "non-discriminatory". In this way, any excess costs must be explained within the cross-border context

Foreign country intermediary (Article 3e)

  • These rules shall apply to foreign intermediaries with a subsidiary or a branch within the EU.
    The enforcement applies as well to foreign intermediaries being client of European custodians and holding European listed companies.

2: To increase the commitment by the institutional investors and the asset managers: (June 2019)

The institutional investors and the asset managers shall be obliged to draw up a shareholder commitment policy which should play a part in facilitating the management of conflicts of interest. In principle, they should publish their commitment policy, the way in which it was implemented and its results.

The Commitment Policy must lay down (Article 3f) the way in which the investor:

  • integrates the "shareholders' commitment" (laid down in Article 2h) in the investment strategy;
  • monitors the companies held (particularly non-financial performance);
  • discusses with the companies held;
  • exercises the voting right;
  • uses proxy services;
  • co-operates with other shareholders.

Regulations on conflicts of interest must be provided for cases where:

  • the investor supplies financial products to the company held;
  • there are board members common to both entities;
  • the investor is affiliated to a company under an on-going takeover bid.

Investment strategy (Article 3g)

  • An annual report on the investment strategy must be published at least on-line.
  • It provides information on a whole series of elements stating whether the investment is made through an assets manager under a specific agreement with the institutional investor. It must show whatever influence it has on the investment policy, etc.

Transparency of the asset managers (Article 3h)

  • Bound by the preceding article, every six months the asset manager gives a view of the way in which the investment strategy was complied with.
  • It goes into detail on the contents of the portfolio, the non-financial performances of the assets held, etc.

3 To strengthen the link between the directors' remuneration and performances (Article 9 and ff):

The proposal aims at increasing the transparency of the remuneration policy and the actual remuneration of the board members by granting shareholders an increased right to examine this remuneration.

The shareholders shall have the right to comment on the remuneration policy and on the remuneration report. All the benefits granted to board members, in any form whatsoever, should be included in the remuneration policy and the remuneration report.

The proposal does not regulate the remuneration level; it leaves it up to the companies and their shareholders to decide.

4 To increase the shareholders right to examine transactions with related parties (Articles 9 and ff):

The proposal requires listed companies to submit to shareholders for their approval transactions with related parties representing more than 5% of the assets, as well as those which could have a significant impact on the profits or the revenue. These transactions may not be entered into unconditionally without this approval.

Listed companies should publicly announce transactions with related parties of lesser importance but which represent more than 1% of their assets, at the time of carrying out transactions. A report written by an independent third party should accompany the announcement.

Member States shall be authorised to exclude transactions between listed companies and wholly-owned members of its group.

5 To increase the transparency of proxy advisers : Article 3i

The proxy advisers must:

  • make precise and reliable voting recommendations based on an in-depth analysis;
    • publish each year the way in which the votes are cast (on-line and to maintain the publication for three years). This must mention the methods and models applied, the sources of information, the local regulatory elements taken into account, clarify discussions with the companies, the number of people assigned to the voting recommendations and the number of recommendations made during the previous year;
  • report on potential conflicts of interest (commercial agreement, etc.).

Current situation:

  • 9 April 2014 publication of the proposal
  • 25 February 2015 proposal by the ECON Committee for the JURI Committee responsible for the legislation.
  • Juily 2015 extraordinary voting procedure in plenary to determine the version of the European Parliament
  • Trilog procedure on due course.
  • A revised compromise text has been issued during autumn 2016
  • Final revised Directive has been adopted on 2017 April the 3rd.
  • 17 May 2017 Publication to Journal Officiel of European Union
  • 10 June 2017 Entry into force with dual transposition delays of 24 months
  • 29 September 2017 1st meeting of CG TECH (expert group in charge of defining guidance for technical implementations standards for few issues)

Next Steps

  • 10 September 2018 implementing acts publication deadline for few issues (Corporate actions, general meeting, identification of shareholders…)
  • 10 June 2019 end of national transposition period for main provisions
  • 10 September 2020 end of national transposition of implementing acts.

SGSS/SMI contact :
Pierre Colladon
Sylvie Bonduelle