Commentary on the financial securities regulation in China in which Caixin argues criminality at the core of the securities sector results in undermined investor confidence and depletes market integrity.

On 6 March 2012, ESMA organised a public hearing at its Paris office on draft technical standards on EMIR. An audio recording of the event is now available, via the following link.

On 6 March 2012, ESMA organised a public hearing at its Paris office on draft technical standards on EMIR. An audio recording of the event is now available, via the following link.

FRC’s Professional Oversight Board has published proposals with regard to the external monitoring of auditors of companies from outside the EU that have issued securities on the London Stock Exchange. These are designed to meet the requirements of the Statutory Audit Directive. In general they would not apply where the audit firm is already subject to an equivalent system of regulation in its home country. The focus is on auditors from countries that the EC has not recognised as having an equivalent system of regulation, or as having firm plans to introduce one. There are 301 such audit firms from 21 countries undertaking just over 40 relevant audits. Responses are required by 25 May 2012.

Further to Market Watch 40, which included the final guidance for reporting transactions in derivatives conducted through clearing platforms of derivatives markets (ISIN and Aii), FSA has now published this note confirming that, from 31 March 2012, firms must report transactions in flex derivatives contracts conducted through Eurex OTC by using the respective Aii code issued for those contracts.

The joint paper from the ESAs invites feedback on planned regulatory technical standards covering risk mitigation techniques for OTC derivatives not cleared by central counterparties. Responses are required by 2 April 2012. Following the consultation period, ESAs will prepare draft technical standards to be included in the consultation paper which will most likely be published in the summer of 2012. In addition, EBA has published a discussion paper on draft RTS on capital requirements for CCPs, which also requires responses by 2 April 2012. .(7/03/12) http://www.esma.europa.eu/system/files/jc_dp_2012_01.pdf; http://www.eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/EBA-DP-2012-01--Draft-discussionpaper-on-RTS-on-Article-12-3-EMIR-.pdf

The EC has proposed the setting up of a European common regulatory framework for the institutions responsible for securities settlement, called Central Securities Depositories. The proposal contains the following key elements: - The settlement period will be harmonised and set at a maximum of two days after the trading day for the securities traded on stock exchanges or other regulated markets (currently two to three days are necessary for most securities transactions in Europe). Market participants that fail to deliver their securities on the agreed settlement date will be subject to penalties, and will have to buy those securities in the market and deliver them to their counterparties. - Issuers and investors will be required to keep an electronic record for virtually all securities, and to record them in CSDs if they are traded on stock exchanges or other regulated markets. - CSDs will have to comply with strict organisational, conduct of business and prudential requirements to ensure their viability and the protection of their users. They will also have to be authorised and supervised by their national competent authorities. - Authorised CSDs will be granted a 'passport' to provide their services in other Member States. - Users will be able to choose between all 30 CSDs in Europe. - CSDs in the EU will have access to any other CSDs or other market infrastructures such as trading venues or Central Counterparties (CCPs), whichever country they are based in. The proposal now passes to the European Parliament and the Council (Member States) for negotiation and adoption.

In this working paper, BIS estimates the amount of collateral that CCPs should demand to clear safely all interest rate swap and credit default swap positions of the major derivatives dealers. The results suggest that major dealers already have sufficient unencumbered assets to meet initial margin requirements, but that some of them may need to increase their cash holdings to meet variation margin calls. The report also found that default funds worth only a small fraction of dealers' equity appear sufficient to protect CCPs against almost all possible losses that could arise from the default of one or more dealers and that concentrating clearing of OTC derivatives in a single CCP could economise on collateral requirements without undermining the robustness of central clearing.

ESMA has published the second part of its final advice on possible delegated acts for the Prospectus Directive. ESMA proposes how to use a prospectus in a retail cascade and provides input on how to review the provisions of the Prospectus Regulation concerning tax information, indices, auditor’s report on profit forecasts and estimates and audited historical financial information.

ESMA has now published the responses to the above papers, which are available to download inpidually via the following links.