ambition – REGULATORY UPDATES
Regulation from A to Z
As a provider of a highly regulated financial market infrastructure, Deutsche Börse Group shares the objective of the national legislator, the European Union as well as the G20 member states to strengthen transparent and regulated markets. The Group helps its customers keep abreast of regulatory changes and offers services to facilitate and ensure compliance.
Governments around the world have agencies in place that regulate and oversee financial markets and companies, e.g. the Basel Committee on Banking Supervision or the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin, German Federal Financial Supervisory Authority). One of Europe’s most influential authorities is the European Securities and Markets Authority (ESMA), whose tasks include ensuring compliance with the harmonised rulebooks for EU financial markets. ESMA is the supervisor of credit rating agencies as well as trade repositories such as Deutsche Börse Group’s REGIS-TR.
Benchmarks are reference values, serving as a yardstick for the performance of financial instruments. As such, they are of vital importance to financial markets. In order to combat manipulation and ensure their integrity, the EU has adopted the new Benchmark Regulation, set to become applicable in 2018. Deutsche Börse Group publishes around 10,850 global indices and benchmarks; its STOXX® and DAX® indices serve as underlyings for a range of financial products and are used to measure the risk and performance of investment activities. Deutsche Börse Group is already ensuring compliance with various international benchmark principles.
Capital Markets Union (CMU)
The CMU is a flagship initiative of the European Commission. Its central aim is to enhance economic growth in the EU by strengthening the role of capital markets and further integrating financial markets. As a market infrastructure provider, Deutsche Börse Group is actively involved in shaping the CMU and has launched several market-led initiatives, such as Deutsche Börse Venture Network®, Venture Match, FinTech Hub, or the new growth segment Scale, which it considers essential to the CMU’s success.
New Capital Requirements Directive and Regulation
(CRD V/CRR II)
The EU’s CRR II package, proposed in November 2016, is the fourth revision of the original CRD for credit institutions and investment firms of 2006. The CRD’s key aim is to strengthen the resilience of the EU banking sector by ensuring that institutions’ capital is of sufficient quantity and quality. It also covers remuneration rules, corporate governance principles and an EU-wide single rule book. In this context, Deutsche Börse Group will continuously analyse the capitalisation of its regulated entities, adjusting it if needed, to ensure risks are adequately covered.
Central Securities Depositories Regulation (CSDR)
The CSDR is one of the key regulations adopted in the aftermath of the 2008 financial crisis. A central securities depository (CSD) is a post-trade infrastructure which provides a central point for depositing financial instruments, e.g. shares and bonds. CSDs are not yet regulated on a European level. The CSDR is set to close this gap and improve the safety and efficiency of securities settlement. The new requirements will likely become effective in 2018. Clearstream, Deutsche Börse Group’s CSD, is actively involved in the legislative process and on track with preparing its applications for licences.
European Market Infrastructure Regulation (EMIR)
Regulators worldwide focus on derivatives markets. New regulations mandate that all standardised derivatives contracts must be cleared through central counterparties. In addition, large parts of off-exchange trading must be settled on a collateralised basis and reported to central trade repositories. To meet these objectives, the EU implemented EMIR in 2012. Deutsche Börse Group helps its customers achieve EMIR compliance, e.g. via Eurex Clearing’s client segregation models (ISA Direct) or REGIS-TR’s trade repository services. Read more about central counterparty clearing in the article “Clearing”.
The revised Markets in Financial Instruments Directive (MiFID II) and the accompanying regulation (MiFIR) regulate the provision of investment services in a multitude of financial instruments – at regulated trading venues as well as in OTC trading. The revision will transform the European securities market; key amendments include expanded transparency provisions, measures to boost the stability and integrity of the financial market infrastructure and improvements to the quality and availability of market data.
Recovery and resolution regulation for CCPs
Recovery and resolution regulation for central counterparties (CCPs) is the next legislative step in implementing the G20 objectives, strengthening the CCPs’ role as neutral risk managers for financial markets. Its objective is to define measures to be taken in extreme but plausible events of financial distress in order to ensure orderly recovery and resolution of CCPs and thus exclude the use of public resources. The EU Commission published a first proposal in November 2016. Deutsche Börse Group, with its clearing houses Eurex Clearing and European Commodity Clearing, supports the spirit of these efforts.
Regulatory technology (regtech)
Regtech describes technology specifically designed to meet regulatory mandates around the world. Due to the sheer amount of data involved and the rapid clip at which regulations are introduced and amended, reporting obligations place high demands on companies and regulators alike. Regtech aims to provide agile and intelligent IT solutions which ease this burden through digitisation and automation, and which are capable of quickly adapting to changing regulatory requirements (learn more about innovative technology at Deutsche Börse Group in the article “Technology and the market of the future”).
T2S, a central platform for securities settlement in central bank money, allows banks to reduce cross-border settlement costs and pool collateral. Clearstream migrated to T2S in February 2017.
Find further information on a broad range of regulatory topics on our website: