The continuing impact of COVID-19 on financial markets in the European Union (EU) is being closely monitored by the European Securities and Markets Authority (ESMA) and National Competent Authorities (NCAs). ESMA, in its initial statement on the COVID-19 pandemic on March 11th, made the following recommendations to financial market participants:
Business Continuity Planning– All financial market participants, including infrastructures, should be ready to apply their contingency plans, including deployment of business continuity measures, to ensure operational continuity in line with regulatory obligations.
Market Disclosure– Issuers should disclose as soon as possible any relevant significant information concerning the impacts of COVID-19 on their fundamentals, prospects or financial situation in accordance with their transparency obligations under the Market Abuse Regulation.
Financial Reporting – Issuers should provide transparency on the actual and potential impacts of COVID-19, to the extent possible based on both a qualitative and quantitative assessment on their business activities, financial situation and economic performance in their 2019 year-end financial report if these have not yet been finalised or otherwise in their interim financial reporting disclosures.
Fund Management– Asset managers should continue to apply the requirements on risk management and react accordingly.
On April 2nd, ESMA also updated its risk assessment for the European Union’s (EU) financial markets to account for the impact of the COVID-19 pandemic.
ESMA, along with NCAs, has taken a number of initiatives to address the effects of the COVID-19 pandemic in the following areas:
ESMA issued a statement to promote coordinated action by NCAs regarding the timeliness of fulfilling external audit requirements for interest rate benchmark administrators and contributors to interest rate benchmarks:
- April 9th – ESMA promotes coordinated action regarding benchmarks external audit requirements
Corporate Disclosure Issues
ESMA has published statements relating to the application of IFRS 9, financial reporting deadlines for issuers and Alternative Performance Measures:
- March 24th – ESMA issues guidance on accounting implications of COVID-19
- March 27th – ESMA issues guidance on financial reporting deadlines in light of COVID-19
- April 17th– ESMA issues new Q&A on alternative performance measures in the context of COVID-19
Fund Management Periodic Reporting
ESMA has published a statement promoting a coordinated risk-based approach by NCAs to their supervision of fund managers’ compliance with their periodic reporting obligations:
- April 9th – ESMA sets out supervisory expectations on publication of investment funds periodic reports
MIFID II & MIFIR Measures
ESMA has published several statements on MiFID II and MiFIR aimed at providing clarification on several issues to financial market participants, including:
- March 20th – ESMA clarifies position on call taping under MiFID II
- March 20th – ESMA sets out approach on MiFIR tick-size regime for Systematic Internalisers
- March 27th – ESMA confirms application date of equity transparency calculations
- March 31st – ESMA provides clarifications for best execution reports under MiFID II
- April 9th – ESMA extends MiFID II and MiFIR transparency review report consultation to June 14th, 2020
- April 9th – ESMA postpones publication dates for annual non-equity transparency calculations and quarterly SI data
In the areas of short selling, ESMA has taken the following actions:
- On March 16th, ESMA issued a decision temporarily requiring the holders of net short positions in shares traded on a European Union (EU) regulated market to notify the relevant NCA if the position reaches or exceeds 0.1% of the issued share capital.
- Lowering the threshold is a precautionary action that is essential for authorities to monitor developments in markets. The measure can support more stringent action if required to ensure the orderly functioning of EU markets to underpin financial stability and investor protection.
- For the EU financial markets, while there is some increase in net short-selling positions, there is no indication that at this stage short selling is negatively impacting the functioning of markets. However, several NCAs have taken action in national markets, reflecting particular national conditions and risks to market functioning of short selling. ESMA, along with NCAs, will continue to monitor developments in this area and are ready to act if necessary
ESMA has issued positive opinions on short-selling measures by the National Competent Authorities of Spain, Italy, France, Belgium, Greece and Austria.
Securities Finance Transactions Regulation Backloading
ESMA has issued a statement on coordinated supervisory action on the application of
Securities Finance Transactions Regulation (SFTR):
- March 26th – ESMA clarifies position on SFTR backloading
Links to all statements and opinions mentioned in this post are available on ESMA’s website, which can be accessed here: https://www.esma.europa.eu/about-esma/covid-19
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