Dear All,


ICMA/AMIC activities

The ICMA ERCC has published an updated memorandum outlining recommendations for repo market best practice to address the transition from EONIA to €STR on 1 October 2019.

ICMA launches CSDR buy-in impact study for bond markets.  The study uses three separate online surveys with the deadline for responses on18 October 2019. The surveys are targeted at:

  1. Sell-side trading desks
  2. Repo and securities lending desks
  3. Buy-side trading desks

The results of the impact study will be published in a publicly available report (projected for late October). The objective of the report will be to provide useful market intelligence as firms finalise their preparations and develop business strategies for implementation in late 2020, to underpin ICMA’s ongoing advocacy work related to Level 3 guidance, and to inform ICMA’s review of its buy-in rules to support implementation and provide market best practice.

The next AMIC conference will take place on 27 November in London and will be hosted by BlackRock. The conference will feature Tatyana Panova, Head of Unit, Capital Markets Union at the European Commission as a keynote speaker on the topic of CMU, followed by panel discussions led by industry practitioners on the development of the STS Securitisation market, the pension gap, PEPP and the effect of negative interest rates and a discussion on the possibility of an EU Ecolabel for funds. All market participants are welcome to attend for free however registration in advance is essential, please use the link above to register. 

Upcoming ICMA Courses

  9-11 October: Introduction to Fixed Income Qualification (IFIQ) 
14-15 October: ICMA Training Course: Introduction to Green Bonds
14-15 October: Securitisation: An Introduction 
    6-8 November: Financial Markets Foundation Qualification (FMFQ)
21-22 November: Fixed Income Portfolio Management 
     25 November: Portfolio Construction


Financial stability

  • (1.10.2019) BIS publishes working paper on financial markets fragmentation

The Bank of International Settlements (BIS) has published a BIS staff working paper on Fragmentation in Global Financial Markets: Good or Bad for Financial Stability?. The author observes that the many regulatory reforms following the Great Financial Crisis of 2007 - 2009 have most often been designed and adopted through an international cooperative process. As such, actions have tended to harmonise national approaches and diminish inconsistencies. Nevertheless, some market participants and policymakers have recently raised concerns over an unwanted and unnecessary degree of fragmentation in financial markets globally, with possibly adverse effects for financial stability. 

The paper reviews the degree of fragmentation in various markets and classifies its possible causes. It then reviews whether fragmentation is necessarily detrimental to financial stability, suggesting that, as is more likely, various trade-offs exist. It concludes by outlining areas for further analysis.
  • (1.10.2019) ESMA issues study on the use of derivatives by UCITS funds

The European Securities and Markets Authority (ESMA) has conducted a study on the use of derivatives by UCITS equity funds in collaboration with researchers from the Technical University of Munich (TUM).

According to ESMA, the preliminary results indicate that the tendency and frequency of trading derivatives is to a large extent embedded in asset manager characteristics. The results point to equity UCITS funds primarily trading derivatives in order to minimise transaction costs or to mitigate risks.

  • (2.10.2019) Speech by Luis de Guindos (ECB) on Key vulnerabilities for euro area financial stability 

Speech by Luis de Guindos, Vice-President of the European Central Bank (ECB), on key vulnerabilities for euro area financial stability. One of these relates to the investment fund sector which he notes that has increasing liquidity risk for some time.

"This reflects a falling share of holdings of liquid government bonds and a fall in cash holdings across the sector. We have recently witnessed cases in which funds holding considerable amounts of illiquid assets (Woodford, H2O and GAM – all UCITS funds) faced severe difficulties in dealing with large-scale outflows. These cases had no systemic repercussions – partly because the outflow triggers were idiosyncratic and partly because the market environment was benign. 

In a more broad-based market downturn, though, we would be concerned that a repricing of financial assets could trigger sudden and large redemptions from these funds, possibly resulting in forced asset sales, which could amplify stress in less liquid markets. This would have wider implications in the form of impaired market liquidity and possible spillovers to the real economy.

While leverage in the euro area fund sector is low on average, there are also pockets of high leverage among some types of alternative funds, and these need to be monitored closely. Even if leverage of UCITS funds is not excessive, it can still add to the procyclical selling of assets if a fund tries to keep its leverage constant during periods of stress."
  • (2.10.2019) ESRB publishes latest Risk Dashboard

The European Systemic Risk Board (ESRB) has published its latest version of its Rish Dashboard in which it is reported that market-based indicators of systemic stress in the EU remained relatively benign despite significant geopolitical and policy uncertainties, highlighting the potential for re-pricing of risks by markets. 

The dashboard shows that economic growth in the EU remained moderate with downside risks to the outlook, while debt levels remain elevated across countries and sectors in the EU – although over the medium-term most countries have deleveraged somewhat. Credit to the private sector continued to grow robustly in many EU Member States, with the cost of borrowing for the private sector remaining low – reflecting the low refinancing costs for banks and the low risk pricing – and, following a period of relative easing, credit standards remained broadly unchanged over the last quarter. Among other things, total assets under management in the EU investment funds and other financial institutions increased in the first quarter of 2019, reflecting a rise in asset valuations following strong declines in the final quarter of 2018.

Fund liquidity
  • (30.9.2019) FCA confirms new rules for certain open-ended funds investing in inherently illiquid assets

The Financial Conduct Authority (FCA) has issued new rules which apply to certain types of open-ended fund investing in inherently illiquid assets known as non-UCITS retail schemes (NURSs). 

The revised rules introduce a new category of funds investing in inherently illiquid assets (FIIA), which needs to comply with additional requirements): enhanced depositary oversight, standard risk warnings on financial promotions and increased disclosure of liquidity management tools and liquidity risk contingency. NURSs which have disclosed to their investors that they are aiming to invest at least 50% of their scheme property in inherently illiquid assets will fall in this category.
Inherently illiquid assets’ definition include: an immovable, an investment in an infrastructure project, a transferable security that is not a readily realisable security, any other security or asset that is not listed or traded on an eligible market and has particular features that make the process of buying or selling difficult or time consuming, a unit in a FIIA or another fund with substantially similar features.
The new rules also introduce an obligation for NURSs to suspend dealing in funds unit where the standing independent valuers expresses material uncertainty regarding the value of 20% of the scheme property. However, the authorised fund manager can continue to deal if they agree with the fund’s depositary that it is in the fund investors’ best interest.

While these new rules are strictly limited for NURSs at this stage, the FCA is “considering whether the remedies set out in this policy statement  should apply more widely than NURSs, and also whether we should be exploring a wider range of potential remedies, both for NURSs and for other types of funds."

Financial integration
  • (30.9.2019) ECB publishes working paper on financial intergration in Europe

The European Central Bank (ECB) has published a working paper which develops composite indicators of financial integration within the euro area for both price-based and quantity-based indicators covering money, bond, equity and banking markets.

The paper finds that financial integration in Europe increased steadily between 1995 and 2007. The subprime mortgage crisis marked a turning point, bringing about a marked drop in both composite indicators. This fragmentation trend reversed when the European banking union and the ECB’s Outright Monetary Transactions Programme were announced in 2012, with financial integration recovering more strongly when measured by pricebased indicators. 

Sustainable finance
  • (30.9.2019) TEG makes recommendations for methodology of EU climate benchmarks

The Technical Expert Group on Sustainable Finance (TEG) has issued its final report on climate benchmarks.

The TEG recommends a set of minimum technical requirements for the methodology of EU Climate benchmarks. These would serve to help investors who wish to adopt a climate-conscious investment strategies make informed decisions.

The final report also recommends a set of environmental, social and governance (ESG) disclosure requirements for benchmark administrators, including the disclosure on the alignment with the Paris agreement.

The report will inform the preparation of delegated acts by the Commission to the low-carbon benchmarks and positive-carbon-impact benchmarks regulation, agreed by the European Parliament and Member States in February 2019. 
  • (1.10.2019) EIOPA issues Opinion on sustainability within Solvency II

The European Insurance and Occupational Pensions Authority (EIOPA) has published an Opinion on Sustainability and Solvency II which addresses the integration of climate-related risks in Solvency II Pillar I requirements.

While Solvency II is well equipped to accommodate sustainability risks and factors, climate change brings considerable challenges to the valuation of assets and liabilities, underwriting and investment decisions and risk measurement.

The opinion stats that Consistently with sound actuarial practice, where risk mitigation and loss prevention can make a significant difference, the development of new insurance products, adjustments in the design and pricing of the products and the engagement with public authorities, should be part of the industry's stewardship activity.

Money markets
  • (27.9.2019) ECB publishes the Euro money market study 2018

The European Central Bank (ECB) has published its “Euro money market study 2018”. The study aims to provide a detailed overview of euro area money markets, with a focus on the key developments and dynamics in various money market segments.

The study finds that activity in the euro money market is less diversified than before the crisis among the five segments – the unsecured, secured, foreign exchange (FX) swaps, Overnight Index Swap (OIS) and short term securities issuance. Accommodative monetary policy and an environment of excess liquidity have dampened activity in some money market segments. The post-crisis shift in banking regulation and a greater focus on risk management have seen a growing preference for secured transactions. 
  • (27.9.2019) IOSCO publishes Peer Review reports on Money Market Funds and Securitisation

The Board of IOSCO has published two update reports entitled Update to the IOSCO Peer Review of Regulation of Money Market Funds and Update to the IOSCO Peer Review of Implementation of Incentive Alignment Recommendations for Securitisation. The MMF report finds that most jurisdictions have implemented the fair value approach for the valuation of MMF portfolios, but progress in liquidity management is less advanced and less even. The securitisation report finds that, overall, progress remains mixed across participating jurisdictions in implementing the IOSCO recommendations for incentive alignment for securitisation.

Investor education
  • (30.9.2019) IOSCO publishes Framework to help members enhance investor education initiatives

The Board of the International Organization of Securities Commissions has published the Core Competencies Framework on Financial Literacy to assist members, investor education providers and other stakeholders in their efforts to develop and implement investor education initiatives.

ESAs announcements
  • (30.9.2019) ESMA announces its 2020 Work Programme

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published its 2020 Work Programme, setting out its priorities and areas of focus for the next 12 months in support of its mission to enhance investor protection and promote stable and orderly financial markets.

The key issue facing ESMA in 2020 is the implementation of its new mandates, and enhanced role, in areas including direct supervision, supervisory convergence, investor protection, relations with third countries, sustainability and technological innovation. 
  • (2.10.2019) ESMA updates its CSDR Q&As

The European Securities and Markets Authority (ESMA) has updated its Questions and Answers (Q&As) regarding the implementation of the Central Securities Depository Regulation (CSDR).

The updated Q&As provide answers to questions regarding practical issues on the implementation of the new CSDR regime.
  • (2.10.2019) ESAs Joint Committee defines its priorities for 2020

The Joint Committee of the European Supervisory Authorities (EBA, EIOPA and ESMA) published today its 2020 Work Programme.

Areas of particular focus of its work will be on PRIIPs, financial innovation - also in relation to the European Commission's FinTech Action plan and the work of the European Forum for Innovation Facilitators (EFIF) - as well as sustainable finance and securitisation.

IBOR transition
  • (2.10.2019) ECB publishes €STR for the first time

The European Central Bank (ECB) has published the euro short-term rate (€STR) for the first time on 2 October 2019, reflecting trading activity on 1 October 2019.

The €STR is published on each TARGET2 business day based on transactions conducted and settled on the previous TARGET2 business day.

Kind regards,


The AMIC Secretariat



Tel: +44 20 7213 0348



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