Central Bank of Ireland publishes Markets Update No 12 of 2024

On 29 November 2024, the Central Bank of Ireland (the Central Bank) published Issue No 12 2024 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 Related Articles at the foot of this page.

The new Update contains the following three items

Central Bank industry letter: thematic review of trading arrangements of ETFs in Ireland

On 28 November 2024, the Central Bank published an industry letter in which it set out the key findings of its 2023 review of the primary and secondary market trading arrangements of Irish authorised ETFs.

The letter also makes clear the Central Bank's expectations and highlights actions to be taken by the boards of Fund Management Companies - where appropriate, these are required to incorporate the necessary changes to their frameworks and practices by the end of Q2 2025.

The Review found that the Irish ETF ecosystem is "functioning effectively" at a sector level, with the Authorised Participant (AP) cohort functioning consistently during both 'normal' and 'stressed' market conditions.

There were, though, shortcomings concerning firms' oversight of APs and Contracted Market Makers (CMMs) - the Central Bank notes its view that the governance structure in place between a Firm and APs/CMMs in relation to the arbitrage mechanism and liquidity provision of ETFs should be consistent with Measure 4 of IOSCO's Good Practices.

Other key findings include (a) inadequate due diligence of APs / CMMs; (b) limited ongoing monitoring of APs/CMMs; (c) lack of board oversight and (d) AP and Market Maker concentration.

European Commission consultation on Guidelines on aspects of the EU's Artificial Intelligence Act

On 13 November 2024, the European Artificial Intelligence (AI) Office launched a consultation on the application of the definition of an AI system and prohibited AI practices under the EU's AI Act. The consultation closes on 11 December 2024.

The consultation is targeted at (among others) providers and deployers of AI systems including businesses, authorities (including local public authorities) and other organisations and the Central Bank regards the consultation as 'a great opportunity for market participants to share their observations with the European Commission'.

ESMA consultation on Active Account Requirements

On 20 November 2024, ESMA published a consultation paper, "Conditions of the Active Account Requirement". The consultation runs until 27 January 2025 - a public hearing will be held on 20 January 2025.

The Consultation Paper  has been updated with the final legal references following the final adoption of EMIR 3. It has been published ahead of the publication of EMIR 3 in the EU Official Journal in order to balance (a) the short deadline for ESMA to submit the draft RTS to the Commission and (b) the need to allow stakeholders sufficient time for proper consideration and comment.