BSP Newsletter – July 2014
CAPITAL MARKETS
We reported in our Newsletter of March 2014 that on February 14th 2014, ESMA, in the context of the European Market Infrastructure Regulation (EMIR), sent a letter to the European Commission (Commission) asking for clarifications on the classification of foreign currency (FX) financial instruments.
Under Directive 2004/39/EC on Markets in Financial Instruments (MiFID) a contract considered as a financial instrument may give rise to authorisations and other obligations. Whether or not an FX contract can be defined as a financial instrument has therefore important implications as regards authorisation requirements under MiFID, but also as regards the scope of application of other EU financial regulations including EMIR, the Capital Requirement Directive and Regulation (CRD4) and the Market Abuse Regulation since they all cross-refer to the definition of financial instruments under MiFID.
Recognising a lack of harmonisation between the EU Member States, the Commission, on April 11th 2014, published a consultation paper (Consultation) with the narrow scope to define FX financial instruments and determine the boundaries between an FX financial instrument and a spot FX contract.
The purpose of the Consultation is to assist the Commission in preparing a formal proposal to ensure clear, adequate and consistent application of the relevant financial regulation across the EU.
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