In this regulatory round-up, we see the US Securities and Exchange Commission propose new joint data standards under the country’s Financial Data Transparency Act of 2022, while Australia opens a consultation to replace Australia’s cash equities clearing and settlement system (CHESS). Elsewhere, the UK’s Financial Conduct Authority (FCA) listing proposals are “a shot in the arm” for UK’s public markets and mooted market reforms look to turn around low engagement with Korean Treasure Bond (KTB) trading.
- CFTC exempts Singapore-recognised Market Operators from SEF registration requirements
- SEC proposes joint data standards
- ASX begins final consultation on CHESS replacement scope and implementation
- Market reforms spark “cautious optimism” for KTB engagement
- One Trading lands regulatory approval for European crypto derivatives trading
- FCA listing proposals “a shot in the arm” for UK’s public markets
- ESMA reports EU bonds subject to MiFID II transparency
- Advancing digital finance will benefit real economy, AFME says
- DIFC and Nusantara Capital Authority to develop financial centre in Ibu Kota Nusantara
Americas
CFTC exempts Singapore-recognised Market Operators from SEF registration requirements
The Commodity Futures Trading Commission (CFTC) has approved an amended order that exempts two recognised market operators (RMOs) authorised within Singapore from CFTC swap execution facility (SEF) registration requirements. The exempted RMOs are FMX Securities and LMAX.
Section 5h(g) of the Commodity Exchange Act (CEA) provides that the CFTC may grant such an exemption if it finds that a foreign SEF is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in the facility’s home country. Likewise, the CFTC may revoke exempt status when a facility is no longer authorised and/or in good standing in its home country.
On 13 March 2019, the CFTC determined the Monetary Authority of Singapore (MAS) regulatory framework for approved exchanges (AEs) and RMOs satisfies the standard in CEA section 5h(g) to exempt a SEF from registration with the CFTC.
SEC proposes joint data standards
The US Securities and Exchange Commission (SEC) has proposed joint data standards that would establish technical standards for data submitted to certain financial regulatory agencies.
The proposed joint standards would promote interoperability of financial regulatory data across the agencies by establishing common identifiers for entities, geographic locations, dates, and certain products and currencies.
SEC chair Gary Gensler said: “This proposal will make financial data more accessible, uniform, and useful to the public. Consistent data standards will make it easier for financial institutions to file reports across multiple agencies. They also will help regulators be more effective and efficient in carrying out our oversight functions.”
In addition, the proposal would establish a principles-based joint standard with respect to data transmission and schema and taxonomy formats, which would enable financial institutions to submit high-quality, machine-readable data to the agencies.
Under the Financial Data Transparency Act of 2022, eight additional agencies have proposed or are expected to propose the joint standards: the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Consumer Financial Protection Bureau, the Department of the Treasury, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency.
APAC
ASX begins final consultation on CHESS replacement scope and implementation
ASX has released a public consultation paper which proposes the CHESS replacement settlement and subregister services be implemented in 2029.
The paper is the second of two consultations undertaken by ASX this year to gather industry feedback on scope and implementation for the project to replace Australia’s cash equities clearing and settlement system (CHESS).
ASX group executive securities and payments, Clive Triance, said: “The proposal to implement CHESS replacement across two main releases reflects how we’ve listened to industry feedback. The staged approach to implementation, where we are delivering the clearing services first in Release 1, followed by delivery of settlement, subregister and additional clearing enhancements in Release 2 is designed to manage several factors, including materially reducing delivery risk and allowing for industry readiness.”
Market reforms spark “cautious optimism” for KTB engagement
Recent market reforms could turn around low engagement with Korean Treasure Bond (KTB) trading, according to research from Bloomberg and the International Capital Markets Association (ICMA).
In a survey of more than 300 global financial sector participants, just 9% stated that they had ever engaged in KTB trading, with only 3% currently trading the bonds. Of those who had never engaged, 88% added that they had no clear plans to enter the market in the near term.
KTB trading was primarily used to diversify portfolios, the respondents shared, noting that there were difficulties in trading them offshore.
However, this low engagement may be about to change. Recent market reforms including the simplified process for third-party onshore foreign exchange in July and the abolition of the investment registration certificate in 2023 were cited as reasons for greater interest in KTB trading, with the view that they will make the process easier.
Upon being presented with the survey’s initial response in May 2024, Sang Hyun Kwak, director of the government bond policy division at the Ministry of Economy and Finance (MOEF) of South Korea, commented: “Enhancing global investor access to the KTB markets is a key priority of the Korean government and Korean regulators. We have been launching a set of measures to simplify the trading of KTB and Korean Won, and will continue to optimise infrastructure to facilitate foreign participation in KTB markets.”
EMEA
One Trading lands regulatory approval for European crypto derivatives trading
One Trading, a European crypto-asset exchange, has been granted an Organised Trading Facility (OTF) Licence by the Dutch financial market regulator, establishing One Trading as a MiFID II trading venue.
One Trading is now the only perpetual futures trading venue in the EU and the first cash-settled perpetuals platform in Europe, including the UK, and establishes One Trading as the first regulated derivatives exchange in Europe accessible to retail clients. The OTF licence from The Dutch Authority for the Financial Markets (AFM) is the first new licence granted in the EU in the past three years.
In addition, One Trading is onshoring crypto derivatives as “traded on a trading venue” instruments.
FCA listing proposals “a shot in the arm for UK’s public markets”
The UK Financial Conduct Authority’s new listing regime came into force yesterday, aiming to allow a wider range of companies to issue shares on a UK exchange.
By removing ‘premium’ and ‘standard’ listing segments and bringing in a commercial companies category for equities shares, the FCA hopes to mitigate frictions to growth once companies are listed, ensure that investors have the information they need to make informed investment decisions, and boost growth on UK stock markets.
In the new rules, voting is no longer needed for significant or related party transactions, while enhanced voting rights have been given greater flexibility. Shareholder approval continued to be needed for key events, including reverse takeovers and the removal of shares from exchanges.
Although the rules allow for greater risk, the FCA has stated that it believes the changes will more accurately reflect the risk appetite needed to achieve economic growth. They also put the UK in closer alignment with international market standards.
ESMA reports EU bonds subject to MiFID II transparency
A total of 1,355 liquid bonds trading on EU trading venues are currently subject to MiFID II transparency requirements, according to the European Securities and Markets Authority’s (ESMA) quarterly liquidity assessment of bonds.
The transparency requirements will apply to these bonds from 19 August to 17 November 2024.
Figures for the assessment are calculated using quantitative liquidity criteria, including daily average trading activity and the percentage of days traded per quarter. Additional data or corrections submitted to the association over the quarter may result in updates to the figure, and will be published in ESMA’s Financial Instruments Transparency System (FITRS).
Advancing digital finance will benefit real economy, AFME says
The Association for Financial Markets in Europe (AFME) has outlined four areas of recommendations for the advancement of digital finance in the EU, arguing that new technologies will increase access to finance and improve capital market development in the real economy.
One key area is a detailed look at how tokenisation and distributed ledger technology (DLT) can contribute to more efficient markets and drive growth. Using the technology could improve access to capital markets and contribute to democratisation, the association stated, and could contribute to safer and more efficient payments, settlement, and securities lifecycle processes.
DIFC and Nusantara Capital Authority to develop financial centre in Ibu Kota Nusantara
Dubai International Financial Centre (DIFC) has entered into a strategic partnership with Nusantara Capital Authority by signing a Memorandum of Understanding (MoU) in Dubai.
DIFC governor Essa Kazimand Basuki Hadimuljono, acting chair of Nusantara Capital City Authority, signed the agreement at DIFC’s premises in Dubai. The MoU outlines a framework for collaboration aimed at advancing mutual interests and the Nusantara Financial Centre in Ibu Kota Nusantara (IKN).
The key areas of collaboration outlined in the agreement include: exchange of expertise in International Financial Centre operations, including regulatory frameworks and business models to enhance operational efficiency and innovation; development of mechanisms enabling entities from DIFC and IKN to ultimately establish registered business operations in each other’s jurisdictions, fostering seamless business integration and participation in global exchanges; as well as collaboration on trends, legislation, and regulations in international financial services to stay ahead of global developments.
Erick Thohir, Indonesia’s minister of state-owned enterprises, and Arif Amiri, CEO of DIFC Authority, emphasised the strategic importance of the partnership, highlighting its potential to stimulate economic growth and drive innovation through international collaboration.
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