SPAIN Law and Practice Contributed by: Miguel Cases and Claudi Rossell, Cases & Lacambra
ation, measurement and control procedures, and (iii) the parent undertaking is not an FC, both parties may apply for an exemption to the local regulators. Coun - terparties shall notify their competent authorities of their intention to apply for this exemption, which will be applicable except if the regulator disagrees within the three months following the receipt of such pro - posal. Among the changes introduced by MiFIR II and EMIR 3, it is worth noting the following. • The exclusion of derivatives from MiFIR II transpar - ency and transactions reporting obligations, except those traded on a trading venue and the OTC derivatives mentioned in Article 8.2.(b) of MiFIR II (ie, the IRS and CDS OTC derivatives denominated in euros, Japanese yen, US dollars or pounds sterling and subject to EMIR’s clearing obligation). Formerly, all OTC transactions whose underlying assets were traded on a trade venue were subject to this obligation. • Derivatives closed with the intention to reduce post-trade risks are exempted from MiFID III trad - ing obligations, best execution obligations and transparency requirements. Likewise, EMIR 3 excludes these derivatives from clearing obliga - tions. It is worth noting that this exemption was formerly limited to portfolio compression, but its scope has been extended to any activity related to post-trade risk reduction. However, the firms offering these types of services are subject to strict governance duties. • EMIR 3 contains new requirements in relation to data quality and penalties for transaction report - ing. In this vein, national competent authorities will impose administrative or periodic penalty pay - ments on entities whose reports repeatedly contain manifest errors. The periodic penalties will be set at an amount up to 1% of the average daily turnover for the preceding business year per day of breach. • EMIR 3 also introduces a new transaction reporting requirement for NFC+s in the event that the parent entity is located in the EU, even when exempted from transaction reporting requirements in respect of intragroup transactions. The parent will have to report to its competent authority the net aggregate
positions of the group’s NFC+s per class of deriva - tives on a weekly basis. EMIR 3 also requires EU clearing members and clear - ing clients who clear in recognised third-country CCPs to report details of their clearing activity in those CCPs to their competent authorities. 3.1.6 Business Conduct Business conduct requirements for parties engaged in derivatives trading are primarily regulated under the MiFID and MiFIR frameworks. These regulations have an extensive scope and require a thorough analysis. The following is a summary of the key business con - duct requirements applicable to such parties. The business conduct requirements covered are as follows: • conflicts of interest; • remuneration; • communications – must be fair, clear and not mis - leading; • dealings with eligible counterparties; • inducements – there is a ban on inducements paid from manufacturers to distributors in relation to the reception and transmission of orders, or the execu - tion of orders to or on the behalf of retail clients, in addition to the existing ban on inducements con - cerning independent advice and portfolio manage - ment; • investment advice – definition and independence; • product intervention; • product governance and sales processes; • best execution; • client order handling; • client categorisation; • suitability; • appropriateness and execution-only business; • reporting to clients; • providing information to clients; • record-keeping; • recording of telephone conversations and electron - ic communications; • complaints handling; and • safeguarding of client assets.
75 CHAMBERS.COM
Powered by FlippingBook