1. Welcome to Euro Shorts, a short briefing on some of the week’s developments in the
financial services industry in Europe.
If you would like to discuss any of the points we raise below, please contact me or one of
our other lawyers.
Claire Cummings
020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com
AIFMD funds under management
The FCA has published a new webpage on which it announces a modification by
consent of the meaning of "funds under management" in Chapter 11 of the
Interim Prudential sourcebook for investment business (IPRU (INV) 11). This
modification changes the meaning of "funds under management" so that firms
whose assets under management include derivative instruments can value those
instruments at market value, instead of converting them into their equivalent
positions in the underlying assets and then valuing them on the basis of that
equivalent position. The modification is valid until 31 January 2015 or on the
change of the Glossary definition of "funds under management" that is used in
IPRU (INV) 11, unless subsequently withdrawn. Those firms wishing to take
advantage of this modification by consent should contact the FCA's Central
Waivers Team. Modification directions granted will be published on the FCA
website.
AIFMD allows passporting of MiFID services
The FCA has explained that an amendment to the AIFMD will make it explicit
that an AIFM's right to passport AIFM services into other Member States will
include services that it is authorised to provide in its home Member State under
Article 6(4) of the AIFMD i.e. MiFID services, such as investment advice,
safekeeping of certain investments and reception and transmission of orders. The
AIFMD provides the mechanism to allow this, explaining that the AIFM may

2. request its home state regulator to issue a notification to the relevant host state
regulator to that effect. In June 2013, the FCA published a statement explaining
that the European Commission did not share its view that a passport exists for
MiFID services under the AIFMD. The FCA warns that some Member States
may have already implemented into their national law the original view of the
EC, in which case it is likely to take them some time to change the law and begin
accepting the passporting of MiFID services, but that the Commission's revised
view is that a notification for a full-scope UK AIFM to provide MiFID services
in another Member State should be accepted by the host Member State regulator.
EMIR reporting deadline
This week saw the reporting obligation under EMIR come into force. From
Wednesday, all relevant derivatives trades will need to be reported to one of the
six new trade repositories. According to reports, the FCA has acknowledged that
reporting will not be perfect on the first day and that it recognised the challenges;
as a result, its response to any instances of non-compliance will be proportionate,
although it warns that non-compliance could lead to enforcement action. It is
also reported that the majority of the TRs, which include the LSE, CME, Warsaw
SE, Deutsche Borse with the Madrid Exchange, and ICE see their repositories as
simply a way of offering a non-stop service in derivatives. This proliferation has
caused the Financial Stability Board to launch a public consultation on how to
link and consolidate all the repository date globally.
Mark Carney revises forward guidance on UK growth
This week the Governor of the BoE has presented the Bank’s latest growth,
inflation and unemployment forecasts and has warned that the UK economy is
still too weak to withstand a rate increase in the near future. Mr Carney has
revised the forward guidance he gave at his first inflation report in August by
dramatically broadening the number of economic indicators used by the BoE to
decide when it will be appropriate to raise interest rates. He has also ramped up
the number of public events by Bank officials in an attempt to communicate its
thinking on the economy more effectively, in order to reassure markets that a rate
rise is not imminent even though unemployment is fast approaching the 7% level
which he named as a threshold for the Bank to consider an increase.

3. US trading on European platforms
The CFTC has confirmed that US banks can trade on European platforms that
are not registered with the US. The decision was welcomed in Europe, as traders
had been waiting for clarification on the new US rules coming into effect next
week, which permit US banks to trade only on those European platforms
registered with the CFTC. It is now clear that US banks can keep trading on
European platforms which are not registered, provided the rules on the platform
are as stringent as those of the CFTC.
European Commission publishes speech on competition
The European Commission has published a speech on competition in the
financial markets by its Vice President, Joaquin Almunia. In his speech, Mr
Almunia stated that a competitive and open internal market and the
implementation of EU competition law are key elements of public policy that
will help put the EU back on track after the recession. He said that the
foundations for a strong growth strategy are based on a more competitive single
market and that this means continuing work to open up markets in banking and
finance and the re-regulation of the financial markets following the financial
crisis.
ECON report on financial services legislation
The European Parliament's Committee on Economic and Monetary Affairs
(ECON) has published an informal report on enhancing the coherence of EU
financial services legislation. The report sets out the conclusions ECON has
drawn from its May 2013 consultation on ways to further enhance the coherence
of EU financial services legislation and contains a number of steps that ECON
intends to take as a result of the consultation. In its introduction to the
consultation last year, ECON explained that, given the transition to a single
financial services rule book across the EU, it was increasingly important that
legislation fits together seamlessly. The report was adopted by ECON on 30
January 2014.

4. ESMA 2014 regulatory work programme
ESMA has published its 2014 regulatory work programme, which provides a
detailed breakdown of the individual workstreams outlined in ESMA's 2014
work programme. The regulatory work programme covers various areas
including the following initiatives: MiFID II, the CRA III Regulation, the CSD
Regulation, which is the proposed Regulation on improving securities settlement
and regulating central securities depositories, and the proposed Market Abuse
Regulation (MAR).
EMIR
The European Commission has updated its webpage on EMIR to announce that it
has adopted regulatory technical standards (RTS) specifying the contracts that
are considered to have a direct, substantial and foreseeable effect within the EU.
The RTS also detail the cases where it is necessary or appropriate to prevent the
evasion of rules and obligations. The Regulation will come into effect 20 days
after the date it is published in the OJ, although the Article relating to the
circumstances under which a contract will be considered to have a direct,
substantial and foreseeable effect will not apply until six months after the
Regulation comes into force. ESMA has also published an updated version of its
Q&As on the implementation of EMIR, acknowledging in an accompanying
press release that both reporting firms and TRs will need a certain amount of
time to properly incorporate the new guidance.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
14 February 2014