European Commission

After a frantic first month for the trade reporting mandate under the European Market Infrastructure Regulation (EMIR), it has all gone relatively quiet. After initial reports of backlogs, frozen IT systems and even reports of some market participants ceasing trading altogether as a result of not being able to on-board with a trade repository, there has been silence.

The fifth version of the Undertakings for the Collective Investment in Transferrable Securities (UCITS V) was approved by the European parliament in mid-April, ahead of the European Parliamentary elections in May. This offers clarity around the directive, since a raft of new European Members of Parliament would likely have resulted in re-negotiations and the re-opening of the discussions around it. With UCITS V, however, now passed, it moves along to the European Securities and Markets Authority (ESMA) to draw up the regulatory technical standards for its implementation.

From a depositary perspective, Article 21 of the Alternative Investment Fund Managers Directive (AIFMD) is where the liabilities – and the opportunities – lie. The Article clearly defines the role of the depositary in the AIF industry within a Directive that is aimed at harmonising the way in which the industry is regulated. Every AIFM must ensure that a single depositary is appointed for each AIF that it manages.

The European Parliament and European Council this week backed a European Commission proposal, that was included in the July 2012 draft UCITS V Directive (Undertakings for Collective Investment in Transferrable Securities) to amend the areas of depositary functionality, remuneration policies and sanctions, all with the aim of further protecting investors in UCITS funds.

ESMA (European Securities and Markets Authority) has written a letter to the EC (European Council) asking for further clarification as to what constitutes a derivative and derivative contracts. It has become clear that there is no harmonised definition across the 28 EU (European Union) states, since the definition of a derivative is derived from MiFID (Markets in Financial Instruments Directive) and there are varying transpositions of this directive across Europe.