ABBL

Eurosystem signs T2S Framework Agreement with first Central Securities Depositories

Today, the European Central Bank (ECB) hosted an event to mark the signing of the T2S Framework Agreement by the Eurosystem and a first group of nine European central securities depositories (CSDs).

• Bank of Greece Securities Settlement System – BOGS (Greece)
• Clearstream Banking AG (Germany)
• Depozitarul Central S.A. (Romania)
• Iberclear (Spain)
• LuxCSD S.A. (Luxembourg)
• Monte Titoli S.p.A. (Italy)
• National Bank of Belgium Securities Settlement System – NBB-SSS (Belgium)
• VP LUX S.á.r.l. (Luxembourg)
• VP Securities A/S (Denmark).

The signing of the Framework Agreement is an important milestone in the T2S project. The agreement governs the legal relationship between the Eurosystem and each CSD participating in T2S. In November 2011, after more than two years of negotiations, the contract was offered to 31 European CSDs, with an invitation to sign by April 2012 or, if additional time was required, by June 2012.

The CSDs that signed the contract today account for around two-thirds of the settlement volumes in the euro area. Other CSDs are expected to sign in June 2012.

Today’s event was attended by senior representatives from across the financial sector. It provided an opportunity for the important contribution of CSDs to the T2S project to be acknowledged. ECB President Mario Draghi described the impact T2S would have on Europe: “The fundamental objective of T2S is to contribute to making Europe a better place to invest, by fostering a single market in post-trade services. It will make financial markets safer and more efficient, and it will increase transparency in the post-trade environment.”

Peter Praet, the ECB Executive Board member responsible for the T2S Programme, outlined how the project is expected to evolve following today’s commitment: “… after today, the spirit of the project will move from negotiation to cooperation. We will work together with CSDs to implement T2S - for the good of European financial markets.”

The T2S project is now more than halfway to delivery, with a go-live date set for 2015.

(Source: European Central Bank)

Hong Kong has just experienced its most significant Funds conference of the year, Fund Forum Asia 2012, revealing the direction of the Asian Investment Fund Industry. Baker and McKenzie (Luxembourg) in cooperation with their local Hong Kong office organised a dedicated client event to coincide with this, where the latest developments of UCITS and AIFMD were presented to an audience of Asian Fund Managers, eager to discover if the benefits of the Luxembourg jurisdiction justified the title of “Gateway to Europe”.

The speakers’ programme of Fund Forum Asia 2012 was filled with CEO’s from many; Global Banks, Investment fund managers and distributors, proving again to be a key nexus for Fund Professionals searching for efficient solutions to the challenges investors are facing.

Sandrine LeClercq, Counsel, commented that “the UCITS brand remains very popular, even beyond its original concept of a European passport for funds. It is becoming a globally recognised vehicle.

There is additional evidence that UCITS funds can be more readily authorised for distribution by local Asian regulators over and above other local fund structures.”

Asian regulators were criticised by a range of parties as a result of their tightening of regulations on Funds imposed since Lehman and Madoff, to the extent where local distributors are claiming “confusing messages”.

“Everything is improving but we still are seeing some of the measures that have been taken or proposals that have been made after the Lehman crisis still have some undesirable effects” reported Steve Chiu, Hong Kong based managing Director at Bosera Asset Management (International)

“The perception of European financial instability does not appear to be so much of a driving concern, perhaps surprisingly”, reported LeClercq “in fact the Euro-crisis was not mentioned once by our clients during our trip to Hong Kong and Taiwan.”

The Hong Kong regulator came in for specific criticism for the amount of time the authorisation process of regulated funds currently took. “It is taking longer than at any point in the last decade, at least six months” reported one fund manager who requested to remain anonymous.

(Source: Baker and McKenzie (Luxembourg))

In April 2012, the value of assets under custody held on behalf of customers registered a decrease of 2 percent to € 11.1 trillion (compared to € 11.3 trillion in April 2011). Securities held under custody in Clearstream’s international business increased by 2 percent from € 5.9 trillion in April 2011 to € 6.0 trillion in April 2012 – while domestic German securities held under custody decreased by 6 percent from € 5.4 trillion in April 2011 to € 5.1 trillion in April 2012.

In April 2012, 3.0 million international settlement transactions were processed, a 1 percent decrease over April 2011 (3.1 million). Of all international transactions, 80 percent were OTC transactions and 20 percent

were registered as stock exchange transactions. On the German domestic market, settlement transactions reached 6.0 million, 6 percent less than in April 2011 (6.4 million). Of these transactions, 66 percent were stock exchange transactions and 34 percent OTC transactions.

For Global Securities Financing (GSF) services, the monthly average outstanding reached € 570.7 billion. The combined services, which include triparty repo, securities lending and collateral management, collectively experienced a rise of 5 percent over April 2011 (€ 542.5 billion).

In the Investment Funds services, 0.45 million transactions were processed, a 14 percent increase over April 2011 (0.40 million).

(Source: Clearstream)

30 April 2012 was the deadline for indication by CSDs of their decision to join T2S early. We can now announce the first group of CSDs that have committed to signing the T2S Framework Agreement, consisting of the following 9 CSDs:

• Bank of Greece Securities Settlement System - BOGS (Greece)
• Clearstream Banking AG (Germany)
• Depozitarul Central (Romania)
• Iberclear (Spain)
• LuxCSD S.A. (Luxembourg)
• Monte Titoli S.p.A. (Italy)
• National Bank of Belgium-Securities Settlement System – NBB-SSS (Belgium)
• VP LUX S.à.r.l. (Luxembourg)
• VP Securities A/S (Denmark)

We are also pleased to announce the event that will mark the signing of this important contract by CSDs and the Eurosystem. The event will take place on 8 May 2012 in Frankfurt, and will be attended by Mario Draghi, ECB President, and Peter Praet, the member of the ECB Executive Board responsible for T2S.

The signing of the T2S Framework Agreement by the first 9 CSDs represents a key milestone for the T2S project. CSDs that need more time to conclude their internal assessments may sign the T2S Framework Agreement by 30 June 2012.

(Source: European Central Bank)

• German CSD to sign T2S Framework Agreement on 30 April 2012
• Clearstream well positioned to become a single entry point to T2S on a pan-European scale

Clearstream announced today that the central securities depository (CSD) for Germany, Clearstream Banking AG, will join the European Central Bank’s TARGET2- Securities (T2S) initiative. T2S is a central pan-European settlement infrastructure platform for the cross-border and domestic settlement of securities against central bank money. The platform will go live in 2015 and aims at significantly reducing the fees for cross-border settlement. Clearstream Banking AG will be amongst the first CSDs to sign the T2S Framework Agreement on 30 April 2012.

Jeffrey Tessler, CEO of Clearstream International SA, said: “TARGET2-Securities will drive the harmonisation of post-trade processes across Europe. It can bring huge benefits to the market and we have therefore been supporting T2S since the beginning of the project in 2006. T2S will result in of the commoditisation of European settlements and is a significant investment for our industry. Over the last months, we have been developing our business approach for a world with T2S. We decided to join T2S as we are confident that we can continue to serve our customers at the right price delivering excellent service levels with an unrivalled product and services portfolio.”

Mark Gem, Member of the Executive Board of Clearstream International SA and responsible for Clearstream’s business strategy, said: “We believe we are well positioned to become the natural entry point to TARGET2-Securities in Europe. With the German CSD as part of our group, Clearstream will account for nearly 40 per cent of T2S settlement volumes in the Eurozone. Clearstream’s customers will benefit from our value-added services in the space of collateral management and asset servicing that are second to none. We are looking forward to moving on with TARGET2-Securities and to playing a leading role in building this critical component of European market infrastructure.”

TARGET2-Securities is one of the largest infrastructure projects launched by the Eurosystem (the ECB and the national central banks) so far. It will bring substantial benefits to the European post-trade industry by providing a single pan-European platform for securities settlement in central bank money, thereby reducing the cost and operational risk of cross-border settlement in Europe. The Governing Council of the ECB, along with European CSDs and other market participants, decided to start this project in July 2006. TARGET2-Securites was officially launched by the European Central Bank’s Governing Council two years later. The German CSD Clearstream Banking AG signed the T2S Memorandum of Understanding in June 2009.

(Source: Clearstream)

On 25 April 2012 the ECON committee of the EU Parliament held its second exchange of views on the MiFID review (both on MiFID II and MiFIR). This was the opportunity for Members of the European Parliament (MEPs) to discuss the report by Mr. Markus Ferber, issued at the very end of March, before submitting amendments to both the EU Commission text and counter-amendments to the Draft report presented by the Rapporteur.

Among the key points, as expected, a large part was dedicated to High Frequency Trading and its impact on EU trading markets, the extraterritorial impact of MiFID and relations with third countries. Interestingly, there were no comments on the execution only and complex/non-complex products. Does this absence of comments imply that it is a done deal? The debate on the key subject of inducements led to a rather positive surprise, as both the EPP (European People Party of the Rapporteur) and the Socialists (Mr. Robert Goebbels) agreed to a large extent on the Rapporteur’s approach to rely primarily on transparency instead of bans. Some dissenting voices, mainly from MEPs from the UK, were heard, but the EPP and Socialists make up about 50% of the votes, which may secure a majority vote for the report.

The big issue will then be what would happen at the stage of level 2 measures developed by ESMA with the EU Commission but without the European Parliament. Talks focused on three other key issues: the organisation of markets (should they or not be organised according the to the equity trading model), the recording of trades and conversations (here opposite views were voiced), and, finally, to a lesser extent, one MEP had some considerations on the systematic internalisers (SI).
 
The forthcoming deadlines: by 10 May 2012 amendments need to be tabled, with a vote in ECON scheduled around July 10. Although the EU Council made some progress, it is nowhere close to catching up with the EP.
 

ESMA has published on 20 April 2012 its final advice on possible delegated acts concerning the Short-Selling Regulation. ESMA's advice specifies the definition of when a natural or legal person is considered to own a financial instrument for the purposes of the definition of short sale (Article 2(2) of theRegulation).

Section II of the advice relates to the net position in shares or sovereign debt covering the concept of holding a position, the case when a person has a net short position and the method of calculation of such a position including when different entities in a group have long or short positions or for fund management activities related to separate funds (Article 3(7)).

Section III sets out the advice on the cases in which a credit default swap (CDS) transaction is considered to be hedging against a default risk or the risk of a decline of the value of the sovereign debt and the method of calculation of an uncovered position in a CDS (Article 4(2)).

Section IV defines the initial and incremental levels of the notification thresholds to apply for the reporting of net short positions in sovereign debt (Article 7(3)).

Section V specifies the parameters and methods for calculating the threshold of liquidity on sovereign debt for suspending restrictions on short sales of sovereign debt (Article 13(4)).

Section VI sets out ESMA’s proposal of advice on what constitutes a significant fall in value for various financial instruments and also specifies, in the form of a draft RTS, the method of calculation of such falls (Article 23(7) and (8)). The full text of the draft RTS is presented in Annex IV.

Section VII also specifies the criteria and factors to be taken into account by competent authorities and ESMA in determining when adverse events or developments arise (Article 30).
 

(Source: European Securities and Markets Authorithy)

La loi du 26 mars 2012 portant modification de la loi du 13 février 2007 relative aux fonds d’investissement spécialisés (ci-après « FIS ») est entrée en vigueur le 1er avril 2012.

Cette loi précise que les modalités d’application des paragraphes (1) et (2) de l’article 42bis qui est ajouté dans le texte de la loi du 13 février 2007 sont arrêtées par voie de règlement à prendre par la CSSF. Ces paragraphes concernent respectivement la mise en oeuvre de systèmes appropriés de gestion des risques et les risques de conflits d’intérêts.

Dans ce contexte et dans l’attente de précisions supplémentaires qui seront apportées dans le règlement en question, la CSSF souhaite déjà communiquer certains éléments qu’elle requiert de la part des fonds d’investissement spécialisés. Les éléments qui suivent sont donc à communiquer à la CSSF, soit immédiatement lors de l’introduction d’un dossier relatif à un fonds d’investissement spécialisé créé après le 1er avril 2012, soit au plus tard pour le 30 juin 2012 (par voie électronique à l’adresse opc@cssf.lu) pour les fonds d’investissement spécialisés créés avant le 1er avril 2012.

A ce titre, les FIS doivent tout d’abord produire à l’attention de la CSSF une description succincte des systèmes de gestion des risques mis en place en considération du principe de proportionnalité afin d’identifier, de mesurer, de gérer et de contrôler de manière appropriée tous les risques matériels auxquels le fonds, respectivement ses compartiments, sont ou pourraient être exposés.

Cette description doit couvrir entre autres des éléments (liste non exhaustive) comme la fonction de gestion des risques (incluant les attributions de responsabilités), son indépendance ou encore les mesures de protection spécifiques mises en place contre les conflits d’intérêts permettant in fine l’exécution indépendante des activités de gestion des risques ou encore les procédures, processus et méthodes visant à mesurer et à gérer de façon appropriée les risques découlant des stratégies d’investissement et du profil de risque du fonds (respectivement des compartiments).

Ensuite, les FIS doivent fournir à la CSSF une description succincte de la politique adoptée ainsi que des mesures concrètes prises afin de se mettre en conformité avec le second paragraphe de l’article 42bis de la loi du 13 février 2007 qui traite de la gestion d’éventuels conflits d’intérêts.
L’envoi à la CSSF des informations telles que reprises ci-avant doit être précédé d’une validation par les dirigeants du FIS.



(Source: CSSF)