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ESMA publishes latest edition of its newsletter
February 14, 2024--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, has today published its latest edition of the Spotlight on Markets Newsletter.
Your one-stop-shop in the world of EU financial markets focused in January on the last ESMA consultation package related to the Markets in Crypto Assets Regulation (MiCA).
We invited stakeholders to send their feedback on reverse solicitation and classification of crypto assets as financial instruments by 29 April 2024 and we have also launched a social media campaign with useful reminders.
In addition, together with the National Competent Authorities, we raised awareness of the requirements which apply when posting investment recommendations on social media. See video here. We have also published our first risk monitoring report of 2024, where ESMA set out the key risk drivers currently facing financial markets.
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Source: ESMA
BlackRock splits custody business for Irish-domiciled ETFs
February 14, 2024--BNY Mellon joins rival State Street as a depositary and administration service provider for the Irish ETFs
BlackRock has appointed BNY Mellon as an additional custodian for €673bn Dublin-domiciled iShares exchange traded funds, splitting custody for the business between two post-trade service providers.
The US bank and custody giant joins domestic rival State Street as a depositary and administration service provider for the Irish ETFs.
The $10tn US fund giant said the move mitigated risk and created efficiency.
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Source: ft.com
BlackRock Debuts Europe's Lowest-Fee India Government Bond ETF
February 12, 2024--BlackRock has entered the rupee sovereign space with Europe's lowest-fee Indian government bond ETF.
The iShares India INR Govt Bond UCITS ETF (INGB) is listed on Euronext Amsterdam with a total expense ratio of 0.35%.
INGB is the fifth India government bond ETF in Europe after the L&G India INR Government Bond UCITS ETF (TIGR) launched in October 2021 with an expense ratio of 0.39%.
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Source: finance.yahoo.com
IMF Working Paper-The Impact of Derivatives Collateralization on Liquidity Risk: Evidence from the Investment Fund Sector
February 9, 2024--Summary:
Stricter derivative margin requirements have increased the demand for liquid collateral, but euro area investment funds, which use derivatives extensively, have been reducing their liquid asset holdings. Using transaction-by-transaction derivatives data, we assess whether the current levels of funds' holdings of cash and other highly liquid assets would be adequate to meet funds' liquidity needs to cover variation margin calls on derivatives under a range of stress scenarios.
The paper finds that labor market The estimates indicate that between 13 percent and 33 percent of euro area funds with sizeable derivatives exposures may not have sufficient liquidity buffers to meet the calls under adverse market shocks. As a result, they are likely to redeem money market fund (MMF) shares, procyclically sell assets, and draw on credit lines, thus amplifying the market dynamics under such stress scenarios. Our findings highlight the importance of further work to assess the potential role of macroprudential policies for nonbanks, particularly regarding liquidity risk in funds.
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Source: imf.org
IMF Working Paper-The Impact of Derivatives Collateralization on Liquidity Risk: Evidence from the Investment Fund Sector
February 9, 2024--Summary:
Stricter derivative margin requirements have increased the demand for liquid collateral, but euro area investment funds, which use derivatives extensively, have been reducing their liquid asset holdings. Using transaction-by-transaction derivatives data, we assess whether the current levels of funds' holdings of cash and other highly liquid assets would be adequate to meet funds' liquidity needs to cover variation margin calls on derivatives under a range of stress scenarios.
The estimates indicate that between 13 percent and 33 percent of euro area funds with sizeable derivatives exposures may not have sufficient liquidity buffers to meet the calls under adverse market shocks. As a result, they are likely to redeem money market fund (MMF) shares, procyclically sell assets, and draw on credit lines, thus amplifying the market dynamics under such stress scenarios. Our findings highlight the importance of further work to assess the potential role of macroprudential policies for nonbanks, particularly regarding liquidity risk in funds.
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Source: imf.org
Boerse Stuttgart Records January Turnover Of Around EUR 8.5 Billion-Trading Volume Increases Compared To The Same Month Of The Previous Year -Growth In Structured Securities, Bonds And Exchange-Traded Products
February 2, 2024--Based on the order book statistics, Boerse Stuttgart generated turnover of around EUR 8,5 billion in January- around 11 percent more than in the same month of the previous year.
Structured securities made up the largest share of the turnover.
The trading volume in this asset class was around EUR 3,7 billion-an increase of around 9 percent compared to the previous month. Leverage products generated turnover of around EUR 2,7 billion.
Investment products contributed around EUR 985 million to the total turnover.
The monthly total for trading in debt instruments (bonds) was around EUR 1,7 billion in January, an increase of around 20 percent compared to the same month of the previous year. At around EUR 828 million, the lion's share of turnover in this asset class was attributable to corporate bonds.
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Source: boerse-stuttgart.de
ESAs recommend steps to enhance the monitoring of BigTechs' financial services activities
February 1, 2024--The European Supervisory Authorities (EBA, EIOPA and ESMA-the ESAs) today published a Report setting out the results of a stocktake of BigTech direct financial services provision in the EU. The Report identifies the types of financial services currently carried out by BigTechs in the EU pursuant to EU licences and highlights inherent opportunities, risks, regulatory and supervisory challenges.
The ESAs will continue to strengthen the monitoring of the relevance of BigTech in the EU financial services sector, including via the establishment of a new monitoring matrix.
In 2023 the ESAs, via the European Forum for Innovation Facilitators (EFIF), conducted a cross-sectoral stocktake of BigTech subsidiaries providing financial services in the European Union (EU) as a follow-up to the ESAs' 2022 response to the European Commission's Call for Advice on Digital Finance.
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Source: ESMA
ECB-Euro area bank interest rate statistics: December 2023
February 1, 2024--Composite cost-of-borrowing indicator for new loans to corporations broadly unchanged at 5.22%; indicator for new loans to households for house purchase decreased by 4 basis points to 3.97%, driven by interest rate effect.
Composite interest rate for new deposits with agreed maturity from corporations unchanged at 3.72%; interest rate for overnight deposits from corporations broadly unchanged at 0.84%
Composite interest rate for new deposits with agreed maturity from households broadly unchanged at 3.29%; interest rate for overnight deposi
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Source: ecb.europa.eu
ESMA consults on reverse solicitation and classification of crypto assets as financial instruments under MiCA
January 29, 2024--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, today publishes two Consultations Papers on guidelines under Markets in Crypto Assets Regulation (MiCA), one on reverse solicitation and one on the classification of crypto-assets as financial instruments.
ESMA invites comments from stakeholders by 29 April 2024.
Consultation paper on guidelines on reverse solicitation
In this consultation, ESMA is seeking input on proposed guidance relating to the conditions of application of the reverse solicitation exemption and the supervision practices that National Competent Authorities (NCAs) may take to prevent its circumvention.
The proposed guidance confirms ESMA's previous message that the provision of crypto-asset services by a third-country firm is limited under MiCA to cases where the client is the exclusive initiator of the service. This exemption should be understood as very narrowly framed and must be regarded as the exception. A firm cannot use it to bypass MiCA.
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Source: ESMA
ECB-Monetary developments in the euro area: December 2023
January 26, 2024--Annual growth rate of broad monetary aggregate M3 increased to 0.1% in December 2023 from -0.9% in November
Annual growth rate of narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, was -8.5% in December, compared with -9.5% in November
Annual growth rate of adjusted loans to households decreased to 0.3% in December from 0.5% in November
Annual growth rate of adjusted loans to non-financial corporations increased to 0.4% in December from 0.0% in November
Components of the broad monetary aggregate M3
The annual growth rate of the broad monetary aggregate M3 increased to 0.1% in December 2023 from -0.9% in November, averaging -0.6% in the three months up to December. The components of M3 showed the following developments. The annual growth rate of the narrower aggregate M1, which comprises currency in circulation and overnight deposits, was -8.5% in December, compared with -9.5% in November.
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Source: ecb.europa.eu
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