Brexit - CONSOB Communication no. 4 issued on 14 March 2019 on OTC derivative contracts: Contract-continuity and operation of trading venues

15 March 2019

In view of Brexit and in the absence of a national transitional regime, CONSOB, in order to ensure the orderly trading conditions and to protect savers, deems it essential to provide operators with a specific information as to manage the measures that may be necessary in such scenario. Pursuant to Communication N. 4 issued on 14 March 2019, CONSOB has reaffirmed some guidelines addressed to the market operators relating to the management of Over the Counter (OTC) derivative contracts not subject to central counterparty clearing and entered into with UK counterparties (so-called servicing) and the operations of the trading venues, including those managing trading systems for government securities trading.

 

(i) OTC derivative contracts servicing not subject to central counterparty clearing and entered into with UK counterparties

In line with the Delegated Regulations of the European Commission adopted in relation to this subject , there is no prejudice as to the possibility to transfer to an EU counterparty - maintaining the current exemptions from the clearing obligations and margin requirements established under the EMIR Regulation - OTC derivative contracts in place with UK counterparties, within the 12 months following the date of Brexit (which at this time appears to have been postponed until 30 June 2019).
 
CONSOB will supervise the servicing activities relating to OTC derivative contracts entered into with UK counterparties in order to facilitate continuity during the 12 months agreed by the Delegated Regulations in light of a possible transfer.
 

(ii) Operation of trading venues

Still in the absence of a national transitional regime, the Italian trading venues intending to extend the operation in any extra-EU country shall be granted the necessary authorization relating thereto pursuant to art. 26 and art. 70, paragraph 2, of Legislative Decree no. 58/98 (TUF). Similarly, the extra-EU trading venues intending to extend their operation in Italy shall be granted the necessary acknowledgment in accordance with art. 70, paragraph 1, TUF.
 
CONSOB keeps carrying out preliminary inquiries in relation to the authorization and acknowledgment requests of the UK trading venues intending to be active in Italy and vice-versa, thus ensuring that such inquiries are settled in the shortest time possible and aiming at providing the continuity in the activities carried out by the operators involved by BREXIT.


[1] The Delegated Regulation (EU) 2019/396 of the Commission, of 19 December 2018, amending the Delegated Regulation (EU) 2015/2205, the Delegated Regulation (EU) 2016/592 and the Delegated Regulation (EU) 2016/1178 supplementing the Regulation (UE) no. 648/2012 of the European Parliament and of the Council, as far as the effective date of the clearing obligation for certain types of contracts is concerned and the Delegated Regulation (EU) 2019/397 of the Commission, of 19 December 2018, amending the Delegated Regulation (EU) 2016/2251 supplementing the Regulation (EU) no. 648/2012 of the European Parliament and of the Council as regards the date within which the counterparties may continue to apply the respective procedures for the risk management relating to certain OTS derivative contracts not subject to central counterparty clearing, published in March 13th 2019 in the Official Journal of the European Union .

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Future Dates

* Estimated date

  • *Mid 2019

    Capital Markets Union to be completed by then

  • *Mid 2019

    The European Commission signposted in its roadmap document that mid-2019 is the period by which the following will be in place: fully functional backstop to the Single Resolution Fund; implementation of the European Deposit Insurance Scheme;  finalising all pending legislative initiatives for Capital Markets Union.

  • 1 December 2019

    End of four-year transitional period for RTS on risk-mitigation techniques for OTC derivatives contracts not cleared by a CCP under EMIR.