European legislation for a new regulatory and supervisory framework for investment firms entered into force on 25 December 2019. You can access the Directive here and the Regulation here. The Directive must be transposed into national law by 26 June 2021. The Regulation applies from 26 June 2021. There are 3 exceptions to these dates summarised below.
The objective is to make rules applicable to investment firms more proportionate and more appropriate to the level of risk which they take. Until now, all investment firms have been subject to the same capital, liquidity and risk management rules as banks. The capital requirements regulation and directive (CRR/CRD4) are based on international standards intended for banks. They do not therefore fully take into account the specifics of investment firms. Investment firms will be subject to the same key measures, in particular as regards capital holdings, reporting, corporate governance and remuneration, but the set of requirements they would need to apply would be differentiated according to their size, nature and complexity.
The key points of the legislative proposals were summarised in this European Council press release from January 2019.
Directive
- The Directive must be transposed into national law by 26 June 2021.
- However, measures to comply with Article 64(5) must be implemented by 26 March 2020.
- Article 64 concerns amendments to MiFID II (2014/65); part 5 of which requires a new Article 49(1) of MiFID II
‘1. Member States shall require regulated markets to adopt tick‐size regimes in shares, depositary receipts, exchange‐traded funds, certificates and other similar financial instruments and in any other financial instrument for which regulatory technical standards are developed in accordance with paragraph 4. The application of tick sizes shall not prevent regulated markets from matching orders large in scale at mid‐point within the current bid and offer prices.’
Regulation
- The Regulation applies from 26 June 2021.
- Article 63(2) and (3) apply from 26 March 2020 - these concern amendments to MiFIR (600/2014), including a new Article 17a on tick sizes
- Article 62(30) applies from 25 December 2019 – this concerns Regulation 575/2013 on prudential requirements for credit institutions and investment firms:
(30) in Article 430b, paragraph 1 is replaced by the following:
‘1. From the date of application of the delegated act referred to in Article 461a, credit institutions that do not meet the conditions set out in Article 94(1) nor the conditions set out in Article 325a(1) shall report, for all their trading book positions and all their non‐trading book positions that are subject to foreign exchange or commodity risks, the results of the calculations based on using the alternative standardised approach set out in Chapter 1a of Title IV of Part Three on the same basis as such institutions report the obligations laid down in points (b)(i) and (c) of Article 92(3).’;
