Central Bank of Ireland publishes Markets Update No 1 of 2023

On 3 February 2023, the Central Bank of Ireland (the Central Bank) published Issue No 1 2023 of its regular Markets Update, in which it sets out alerts of interest to Irish regulated firms and other market participants.

For our summaries of the previous issues, please see the right-hand column of this page.

Of the various items covered in this Issue, we would highlight, in particular, the following:

ESMA issues its first opinion on the draft European Sustainability Reporting Standards

On 26 January 2023, ESMA issued an Opinion on the first set of draft European Sustainability Reporting Standards (ESRS Set 1) developed by the European Financial Reporting Advisory Group (EFRAG).

The Opinion confirms that, in ESMA’s view, ESRS Set 1 broadly meets the objective of being conducive to investor protection and of not undermining financial stability.

Background
The EU’s Corporate Sustainability Reporting Directive (CSRD) requires in scope undertakings to report a range of ESG information in accordance with new European sustainability reporting standards (ESRS).

EFRAG was appointed technical adviser to the European Commission to develop draft ESRS, which the Commission will then adopt as Level 2 delegated acts.

On 23 November 2022, EFRAG delivered its first set of draft ESRS to the Commission.

On 25 November 2022, the Commission requested the three ESAs to provide their opinions on the first set of ESRS.

ESMA delivered its Opinion on 26 January, along with the EBA and EIOPA.

The Commission will now adopt draft Level 2 measures for scrutiny by the Council of the EU and the European Parliament before these are published in the Official Journal.

ESMA publishes data for the quarterly liquidity assessment of bonds

On 27 January 2022, ESMA published its new quarterly liquidity assessment of bonds under MiFID II / MiFIR.

Although, through a technical error, the data were published ahead of 1 February 2023 (the planned date of publication), the application date remains unchanged - the transparency requirements for bonds deemed liquid will apply from 16 February 2023 to 15 May 2023.

Background
MiFID II/MiFIR introduces transparency requirements for equities, bonds, structured finance products, emission allowances and derivatives, empowering competent authorities (CAs) to waive the obligation for market operators and investment firms operating a trading venue, to make public pre-trade information for non-equity instruments.

Commission Delegated Regulations 2017/567, 2017/587 and 20174/588 (on transparency requirements for equity instruments) require the relevant NCAs to calculate and publish information related to the liquidity classification, the transparency thresholds (LIS and SMS) and tick size band assessment of equities, while Commission Delegated Regulation 2017/583 (on transparency requirements for non-equity instruments) requires them to publish information on the liquidity classification of financial instruments, sizes large in scale compared to the standard market size (LIS) and the size specific to the instrument (SSTI).

ESMA consults on the review of the methodology on stress test scenarios for Money Market Funds

On 31 January 2023, ESMA published a consultation paper seeking feedback on the review of the methodology included in the Guidelines on stress test scenarios under the Money Market Funds (MMF) Regulation.

The consultation period closes on 28 April 2028 and ESMA intends to publish its Final Report by Q4 2023.

Background
Article 28 of the MMF Regulation requires ESMA to develop guidelines which establish common reference parameters for the stress test scenarios included in the stress tests which MMF managers must conduct. ESMA must update the guidelines at least annually.

This consultation paper proposes an update to the methodology in section 4.8 of the Guidelines and seeks views on revisions covering the liquidity and macro scenarios, taking into account the interaction between liquidity and redemption pressures in light of the stress event experienced in March 2020.

ESMA reviews the scope of clearing and derivatives trading obligations

On 1 February 2023, ESMA published its Final Report setting out draft Level 2 RTS on the clearing (CO) and derivative trading (DTO) obligations to accompany the benchmark transition from EONIA and LIBOR to alternative benchmarks, (primarily Risk-Free Rates such as €STR, SOFR, SONIA and TONA).

The draft RTS have been submitted to the European Commission for endorsement.

In due course, the RTS are expected to be adopted by the Commission, scrutinised by the Council of the EU and European Parliament and published in the Official Journal.