ESMA statement about no-deal-Brexit

This morning, ESMA has upload a declaration of their point of view related to a “no-deal-Brexit”; and its implications in the MiFID II/MiFIR and Benchmark (BMR) provisions.

The European Securities and Markets Authority (ESMA) statement published the following opinions:

  • The MiFID II C(6) carve-out

    • A derivative contract must meet three conditions;itmust
      • qualify as a wholesale energy product
      • be traded on an OTF
      • be physically settled.
  • Trading obligation for derivatives;

    • Thus, ESMA does not have, at this point in time, any evidence that market participants. Will not be able to continue meeting their obligations under the trading obligation for derivatives in case of a no-deal Brexit. And in the absence of an equivalence decision by the Commission covering UK trading venues. Nevertheless, ESMA will continue to monitor closely how liquidity develops post-Brexit and whether markets will be sufficiently liquid to allow EU27 market participants to execute transactions in derivatives subject to the trading obligation on eligible trading venues.
  • ESMA opinions on post-trade transparency and position limits;

    • Published in 2017, ESMA had two opinions on third-country trading venues:
      • investment firms trading on third-country trading venues meeting a set of criteria. Are not required to make transactions public in the EU via an approved publication arrangement (APA).
      • commodity derivatives contracts traded on third-country trading venues. Meeting a set of criteria are not considered as economically equivalent over-the-counter (EEOTC) contracts for the position limit regime.
  • Post-trade transparency for OTC transactions between EU investment firms and UK counterparties;

    • investment firms established in the UK will no longer be considered EU investment firms but will fall into the category of counterparties established in a third country. In consequence, EU investment firms are required to make public transactions concluded OTC with UK counterparties via an APA established in the EU27.
  • BMR: ESMA register of administrators and 3rd country benchmarks.

    • Those UK administrators were originally included in the ESMA register as EU administrators, but after a no-deal Brexit they would qualify as 3rd country administrators (for which the BMR foresees different regimes to be included in the ESMA register).

Here you can find the whole statement published by ESMA and follow their next steps.

ESMA makes an analysis about Brexit