FIA welcomed more than 100 attendees from across the derivatives industry to its forum in Frankfurt on 24 September, where the impact of post-crisis reforms, new rules in Europe and international oversight of cross-border trading and clearing came under the spotlight.
Following opening remarks by FIA’s President and CEO Walt Lukken, regulators involved in the legislation and oversight of the derivatives markets joined with market practitioners to discuss the challenges facing the industry. Brexit was a key theme on all panels, with speakers stressing the importance of equivalence decisions for trading venues and CCPs.
In a keynote address, Elisabeth Roegele, Deputy President of BaFin, noted that a unified regulatory framework is required to prevent regulatory arbitrage. On the upcoming MiFID/MiFIR review, Roegele said that the regulations have not always led to improvements and Germany is proposing amendments in some areas, such as the cost of market data. She concluded that given the speed at which new regulatory requirements have been implemented in recent years, the industry needs to take time to review and assess the impact of existing rules before enacting new ones.
In the following panels, participants discussed the current regulatory landscape, pointing out the positive impact of MiFID II on non-financial companies that are able to make use of the ancillary activity exemption. They also noted the negative impact of the investment research requirements on small companies. The Capital Markets Union and the increasing focus on sustainable finance were highlighted as some of the most important developments.
Speakers on the cross-border issues panel discussed the importance of market access, focusing on the impact of the UK’s departure from Europe and the equivalence approach. They agreed that the CCP equivalence decision that ends on 31March 2020 will need to be extended. On reporting, the panellists noted that the current landscape is fragmented and has resulted in duplicative reporting efforts. A single reporting framework would be preferable, provided it can fulfil regulatory objectives, they said.
In the afternoon, regulators discussed MiFID II/MiFIR and the upcoming review process. Germany has consulted publicly with market participants and published position papers while other regulators are assessing the impact of the rules bilaterally with market participants and may publish requests for feedback in the coming months.
All agreed that MiFID II/MiFIR “got the big things right” and that amendments should be limited to a few specific issues. Improved investor protection was identified as one of the positive outcomes of MiFID II, but regulators stressed that one of the conditions for good investor protection is functioning wholesale markets and Brexit remains a key concern.
The panel agreed that overlapping reporting requirements should be avoided if enough data is available for monitoring purposes. The panel concluded that Europe must work on keeping markets open, keeping liquidity wherever it is located based on market demand and create new liquidity where there is a need for it.
The day concluded with a panel discussion on the new regulations emerging from Brussels in areas such as benchmarks, sustainable finance, crypto assets and fintech and the drive to strengthen the euro’s position as a global currency.