Structured Products Bulletin: Q2 2025

Welcome to our structured products bulletin which provides a review of key legal and regulatory developments in the structured products space during the second quarter of 2025.

A tumultuous second quarter of 2025 has shaken the global geopolitical landscape as erratic US trade policy has steered the world economy into a new and uncertain era and highlighted the complexities of international relations. Ongoing political power struggles, military conflict and instability are dominating headlines and market forecasts. Financial markets around the world continue to feel the effects of the resulting volatility and investors are increasingly seeking safe havens.

As the clock ticks down to a possible European trade truce with the US, EU leaders retreat to stability and predictability. Financial independence is now imperative and the nascent EU Savings and Investment Union, which places retail savings and investment at the centre of turbocharging growth, provides fresh impetus for ongoing efforts to bolster market architecture, retail investor protection and wholesale markets, which will continue throughout 2025 and beyond.

Although it does not extend to financial services, the UK-EU post-Brexit 'reset' is an encouraging step towards a new era of co-operation, and recent trade deals demonstrate the UK's negotiating power on the global stage. This highlights the importance of the UK's work on its post-Brexit regulatory reforms, including in areas affecting structured products such as prospectuses and debt offerings to retail investors and new product information rules for consumer composite investments, on which key progress will be made in the second half of 2025 and beyond.

We are pleased to set out our second quarter of 2025 update covering legal and regulatory developments affecting structured products below.

EU

EU Prospectus Regulation

ESMA Final Reports on Level 2 measures under the EU Prospectus Regulation

On 12 June, ESMA published its Final Reports to the European Commission on Level 2 measures for the EU Prospectus Regulation, which follow its late 2024 consultation on prospectus format and content, and Call for Evidence on prospectus liability. The Final Reports cover:

• Technical Advice on the Content and Format of Prospectuses: ESMA's advice covers the standardised content and format of prospectuses (and the standardised "sequence" of the prospectus including base prospectus and final terms); the proposed disclosure annexes for non-equity (debt) securities that are advertised with ESG features; advice relating to the scrutiny of information in prospectuses and prospectus approval procedures (including amendments to technical standards 2019/980); and proposals for updating the data reporting requirements in line with Listing Act changes and in relation to the implementation of the European Single Access Point (ESAP), which are set out in the updated Delegated Regulation 2019/979 on metadata. Among the key aspects of ESMA's Advice are the following:

  • The strict sequencing requirements will only be applied to "vanilla" debt prospectuses and not to other types such as base prospectuses or those describing securities which give rise to payment or delivery obligations linked to an underlying asset;

  • Separate Annexes to the EU Prospectus Regulation for "wholesale" and "retail" debt securities will become a single set of Annexes for all "standard" debt securities, with a clearer delineation of whether the provisions apply to wholesale or retail, with certain content requirements only applicable for retail securities;

  • Detailed information will be required to be included in a prospectus for non-equity securities where they are advertised as considering ESG factors or pursuing ESG objectives;

  • The requirement for prospectuses to contain audited financial statements in respect of the issuer/guarantor covering the latest two financial years will be reduced to one financial year (with issuers retaining the ability to include additional information where necessary);

  • The requirements for a prospectus to include a cover note describing its subject matter, and a description of the issuer's Key Performance Indicators for each financial year covered by the historical financial information in the prospectus, have been dropped; and

  • Enhanced powers are granted to competent authorities in relation to the scrutiny and approval of prospectuses.

The Commission will decide whether to adopt the draft technical standards within three months (which period may be extended by a further month).

• Technical Advice on Prospectus liability: this presents the feedback received to the earlier Call for Evidence and ESMA's resulting advice to the Commission, along with an update to the relevant sections of the 2013 Report on civil prospectus liability. In terms of actioning ESMA's Advice in this area, the Commission must report to the European Parliament and Council by 31 December 2025 on whether further EU harmonisation in this area is warranted.

New ESMA Questions & Answers on the EU Prospectus Regulation

On 6 June 2025, ESMA updated its Q&A tool with several new questions on the Prospectus Regulation, and in particular, the concept of incorporation of information by reference. The Q&A provide valuable assistance in dealing with some key questions arising following the introduction of the Listing Act package in late 2024. The new Q&A include the following clarifications:

• Question 2255: the type of financial information that can be incorporated by reference under Article 19(1b) includes annual and interim financial information, audit reports and financial statements, corporate governance statements and remuneration reports.

• Question 2257: where financials have not yet been published, the base prospectus should contain (in the relevant section) a hyperlink to where the new annual or interim financial information will be published once it becomes available.

• Question 2259: issuers are not required to produce a supplement when annual or interim information is incorporated by reference under Article 19(1b).

• Question 2254: clarification of the interaction between the Prospectus Regulation and the Green Bond Regulation and the timing of various publishing requirements, including that: issuers may publish the documents required prior to an EU Green Bond (EuGB) issuance (e.g. EuGB factsheet, prospectus) at different times provided the information is not misleading; adverts are permitted where they comply with Article 22 of the Prospectus Regulation by stating that a prospectus has or will be published and indicating where a copy can be obtained; the designation as an EuGB takes effect when the bond is issued (at settlement), so that any documents published before issuance should not mislead potential investors about the possible outcome of the external review of the EuGB and examination of the draft prospectus by competent authorities.

PRIIPs Regulation

Updated ESMA Questions & Answers on the PRIIPs KID

On 5 May 2025, ESMA published an update to its consolidated Q&A on the PRIIPs KID and the related PRIIPs Delegated Regulation, in particular the PRIIPs Key Information Document. The key updates made to the Q&A focus on:

• Section III (B): Market Risk Measure ("MRM") class determination in Annex II, Part 1 of the PRIIPs Regulation -- relating to the required annual review of the KID and the approach to be taken to any changes to the MRM class determination within that period;

• Section VI: Performance Scenarios (Articles 3 and 8 and Annexes IV and V of the PRIIPs Regulation) -- relating to the calculation of stress scenarios; and

• Section XIII (E): Calculation of the summary cost indicators in Annex VI, Part 2 of the PRIIPs Regulation -- confirming the requirement for the inclusion of entry costs within the €10,000 amount referenced in point 90 of Annex VI.

Benchmarks Regulation

Final Regulation amending the Benchmarks Regulation (BMR) published in the Official Journal

On 19 May 2025, following progress made towards reaching agreement during early 2025, the Regulation Amending the BMR was published in final form in the Official Journal of the EU as Regulation 2025/914. The Regulation entered into force on 9 June 2025 but its provisions will not take effect until 1 January 2026. By way of reminder, the Regulation: removes "non-significant benchmarks" from the scope of the BMR; allows administrators to opt-in to the regime for non-significant benchmarks exceeding a €20 billion use threshold; provides for significant benchmarks to be approved within 60 days or replaced in financial instruments; requires administrators on ESMA's Register to disclose ESG-related information for their benchmarks; exempts systemically important FX spot rates (see the item immediately below); and makes the ESMA Register a "golden source" of information on approved administrators and their benchmarks.

European Commission Targeted Consultation on Exempting Spot FX Benchmarks under the BMR

On 9 May 2025, the European Commission launched a Targeted Consultation on identifying the spot FX benchmarks to be exempt under Article 18a of the EU Benchmarks Regulation (as amended by the Regulation Amending BMR), which sets out the conditions to be met by such exempt benchmarks. These are that the benchmark: references a spot exchange rate of a third-country currency to which currency controls apply; and is either used on a frequent, systematic and regular basis to hedge against adverse foreign exchange rate movements, or does not have an equivalent alternative benchmark provided by an administrator located in the EU. The consultation is addressed to supervised entities using spot FX benchmarks, companies that hedge against exchange rate movements using spot FX benchmarks, competent authorities and benchmark administrators. Comments were requested by 4 July 2025.

UCITS

ESMA Final Report on the UCITS Eligible Assets Directive

On 26 June, ESMA published its Final Report to the European Commission setting out technical advice on the review of the UCITS Eligible Assets Directive (EAD), which helps define the assets in which a UCITS may invest. ESMA has been reviewing the framework to consider whether greater harmonisation is needed across the EU in the implementation of the framework in terms of the procedural aspects and also in the interpretation of the eligibility criteria for eligible assets. The Report makes several recommendations to the Commission for legislative changes, including:

• Liquidity assessments would be required at both the individual asset and overall portfolio levels, with ESMA suggesting additional clarification as to the liquidity criteria that should be taken into account under a more principles-based, risk-aware approach;

• The Commission should clarify the possible application of a "look-through" approach to determining the eligibility of asset classes for at least 90% of the UCITS portfolio which would also apply to exchange-traded notes, exchange-traded commodities and "delta-one" instruments (those with a price which moves in line with the underlying on a one-to-one basis) and certain derivatives, subject to an appropriate transitional period;

• Indirect exposures to certain alternative assets, including transferable securities and money market instruments (which would be subject to a portfolio limit of up to 10%) would not be subject to the look-through approach, and the category would be expanded to include certain derivatives and investments in units or shares of open-ended EU alternative investment funds (AIFs);

• The definition of "transferable securities" would be clarified and simplified to improve supervisory convergence, with possible alignment between the UCITS and MiFID II legislation and clarification of the valuation and consistency criteria; and

• The provision of greater clarity on the classification of eligible/ineligible assets including money market instruments, financial instruments embedding a derivative, financial indices, investments in AIFs, ancillary liquid assets and investments in foreign currencies.

The European Commission will now consider ESMA's advice as part of its review of the EAD, and legislative proposals will be issued in due course.

Read the Simmons & Simmons Briefing and detailed Note (Link) on the ESMA Final Report.

Retail participation in capital markets

ESMA Call for Evidence on Understanding the Retail Investor Journey

On 21 May 2025, ESMA published a Call for Evidence which seeks input from market participants on key aspects of the investor journey, in particular investors' experiences relating to investment products within the scope of MiFID II, such as shares, bonds, investment funds and structured products. The primary objective is to assess whether MiFID II requirements effectively support investor protection while ensuring accessibility and ease of engagement for retail investors. In particular, ESMA seeks to understand whether certain regulatory and non-regulatory requirements support or hinder retail investors' engagement with capital markets. Specific regulatory requirements directly impacting retail investors include:

• Effective disclosures: excessive or complex disclosures can overwhelm investors, and ESMA seeks input on whether current disclosure requirements genuinely support informed decision-making;

• Suitability assessments: while the suitability process is crucial for ensuring that investment advice and portfolio management align with investors' knowledge, experience, financial situation and investment objectives, feedback is sought on whether the suitability assessment process strikes the right balance between investor protection and accessibility/simplicity; and

• Appropriateness assessments: input is also sought on the appropriateness assessment for non-advised services, in particular whether it strikes the right balance between investor protection and accessibility/simplicity.

Other, non-regulatory barriers to retail investor participation in capital markets are also examined to determine whether there are factors beyond regulation which contribute to retail investors' hesitation to invest. These could include the perceived complexity of financial products, high fees, past experiences of low returns, limited risk appetite and lack of trust in investment service providers. The Call for Evidence also considers why younger investors are drawn to speculative and volatile assets, such as cryptocurrencies, over more traditional investment products. Factors contributing to this trend include the promise of higher returns, lower perceived costs, ease of access and influence from social media.

By addressing both regulatory and non-regulatory barriers, ESMA's aim is to create a more accessible and effective investment environment for retail investors across the EU to enhance both investor protection and retail engagement in financial markets. All market participants are encouraged to respond to the Call for Evidence by the 21 July 2025 deadline.

For further information, see our Simmons & Simmons Insights Briefing on the Call for Evidence.

CSDR/Trade Settlement        

Progress towards T+1 Settlement in the EU: Amending the CSDR

On 18 June, the European Council and Parliament announced that provisional agreement had been reached on the proposed Regulation to shorten the settlement period for EU transactions in transferable securities. The proposed Regulation would amend Article 5(2) of the Central Securities Depositaries Regulation (CSDR) to provide that the settlement cycle on trades in transferable securities, such as transactions in shares and bonds executed on EU trading venues, will be shortened from two business days (T+2) to one business day after the trade date (T+1). The Council has amended the original proposal to include an exemption from the T+1 settlement cycle for securities financing transactions (SFTs), since parties to these transactions may need to agree to non-standard settlement periods. That exemption would only apply to SFTs that are documented as single transactions composed of two linked operations. Trialogue negotiations between the EU Commission, Council and Parliament will now begin, with a view to agreeing the text well ahead of 11 October 2027 which is the agreed date for the transition to T+1 across the EU (the UK has also committed to this timeframe as previously noted).

On 30 June, under the new governance structure announced to facilitate the transition to the T+1 settlement cycle within the EU, the new EU T+1 Industry Committee launched a detailed High-Level Roadmap containing a set of non-legally binding recommendations designed as a practical, expert-led framework to assist market participants in identifying and addressing the most critical operational considerations and support their preparations for the move to T+1.

EU SIU Strategy

EU Actions on Savings and Investment Union (SIU)

Among the key recent activities of the European Union in developing its new Savings and Investment Union (SIU, the revamped "Capital Markets Union") include publication of the following documents:

• SIU Strategy: on 19 March, the European Commission published its Strategy for the SIU in a Communication setting out the broad scope of the initiatives which form the overall SIU Strategy.  The SIU is intended to foster the development of banking and capital markets within the EU and improve links between savings and investments to enable EU companies to meet their capital needs while increasing returns for EU citizens on their long-term savings. Four key strands of work (which often overlap) will focus on: citizens and savings; investments and financing; integration and scale (see the Targeted Consultation below); and efficient supervision within the single market.

• Targeted Consultation on the Integration of EU Capital Markets: on 15 April this core part of the SIU Strategy was released for input by 10 June. Feedback was sought in relation to two main areas:

  • Barriers to the integration and modernisation of trading and post-trading infrastructures, the distribution of funds across the EU and efficient cross-border operations of asset management; and

  • Barriers specifically linked to supervision, focusing on regulatory simplification in areas including trade, post-trade and the asset management and funds sectors.

Key questions under consideration include whether the PRIIPs KID should be simplified, how to enhance access to and the interconnection between trading venues, the barriers to cross-border settlement, the impact of new technology such as Distributed Ledger Technology, issues including the use of tokenised assets under the Financial Collateral Directive, the efficiency of clearing and settlement within the EU, obstacles under the UCITS and AIFMD legislation including fund marketing and distribution, passporting, investment limits (including in securitisations) and enhancing EU-wide supervision under that legislation.

• Call for Evidence on market integration: on 8 May (with a response date of 5 June) the Commission launched a call for evidence on: identifying barriers preventing the EU's trading and post-trading infrastructure from achieving a truly frictionless single market; examining whether the current regulatory and supervisory setting is fit for the capital markets, in particular for market operators with strong cross-border activities or operating in new or emerging sectors; and reviewing the toolbox of the European Supervisory Authorities to assess how to strengthen and improve their effectiveness and efficiency. The Commission expects to adopt a legislative proposal in Q4 2025.

For further information, see the latest Simmons & Simmons Insights Briefings on the Call for Evidence and background information on the SIU Strategy Communication.

UK

UK PRIIPS: CCI

FCA issues second consultation on UK CCIs regime, replacing PRIIPs

On 16 April, the FCA issued a second set of proposals for consultation on implementing the new Consumer Composite Investments (CCIs, formerly PRIIPs) regime in the UK. An earlier consultation in late 2024 focused on the product information rules required under the CCIs regime. This second consultation, in FCA Consultation Paper 25/9 set out for comment (by 28 May) the FCA's proposals in relation to the remaining aspects of the product information requirements for which firm-facing rules are required, including cost disclosures, complaints handling and transitional provisions, for CCI manufacturers and distributors. The proposals covered:

• Removing the requirement on firms to calculate and disclose implicit transaction costs;

• Aligning duplicative cost requirements in the MiFID Org Regulation with the CCI regime for firms subject to both regimes;

• Requiring unauthorised firms subject to the FCA's Product Disclosure Sourcebook (DISC) rules to implement certain complaints-handling procedures;

• Transitional provisions that allow firms flexibility to move across to the new regime as soon as they are ready; and 

• Consequential amendments to other parts of the Handbook. 

Taking into account feedback to both consultations, the FCA plans to issue its final rules for CCIs in a Policy Statement in late 2025, and the new rules will take effect 12-18 months after that date.

Cryptoassets

FCA announces plans to lift ban on crypto ETNs

On 6 June, the FCA announced that it will lift the prohibition in COBS 22.6 on marketing, selling and distributing crypto exchange traded notes (cETNs) to UK retail investors. This means that cETNs could be sold to individual consumers, rather than just professional investors, in the UK, provided that they are traded on an FCA-approved investment exchange (i.e. a recognised investment exchange). Financial promotion rules would apply so that appropriate risk information is provided. A consultation paper is to be issued in due course outlining the plans.

MiFID Org Regulation   

PRA Consultation on MiFID Organisational Regulation

On 23 April, the UK Prudential Regulation Authority (PRA) published Consultation Paper 9/25 which sought feedback on the PRA's approach to replacing the EU-derived MiFID Org Regulation in its rules, for PRA-authorised firms. The PRA's rules will cover general organisational requirements, outsourcing, record-keeping, compliance and internal audit and risk management for PRA-authorised banks, building societies and investment firms, including those offering structured products. Since the PRA's proposals do not involve material changes to the policy substance, the response period for CP9/25 was short and closed on 23 June.

Together with the FCA's similar consultation (and release of the final draft of the MiFID Org Regulation Statutory Instrument) earlier in 2025, the PRA's draft rules complete the regulatory framework for MiFID Org Regulation replacement in the UK, with final rules in Policy Statements to be published by both the FCA and PRA in the second half of 2025. Once the EU-derived MiFID Org Regulation is repealed under FSMA, the new legislation and FCA/PRA rules will take effect. This is expected to take place in the second half of 2025.

Trade Association Updates

ICMA Response to ESMA draft Guidelines on Prospectus Supplements

On 19 May, ICMA submitted its Response to ESMA's consultation on draft guidelines for supplements introducing a "new type" of securities to a base prospectus. ICMA's response notes that:

• Instrument "type" should not be equated with mere "features" in testing whether a supplement is acceptable;

• Doing so would add significantly to the restrictiveness of the Prospectus Regulation regime, inconsistent with EU policy direction (and historic ICMA suggestions);

• The existing ability to front-load base prospectuses with information does not alleviate this;

• Neither "use of proceeds" bonds nor sustainability-linked bonds should be seen as new "types" of instrument; and

• Supplements should be acceptable unless they involve certain securities note annexes or building blocks (or specific sections thereof) that were not previously relevant to the base prospectus in question.

ESMA's consultation closed on 19 May 2025 and responses are under consideration.

ICMA Updates Guidance on Sustainable Bonds

On 26 June, ICMA issued an update to the Green Bond Principles which now refer to the Green Enabling Projects Guidance and now include "activities" in the definition of green projects (alongside assets, investments and other related and supporting expenditures). On the same date, ICMA released a series of updates to other aspects of its sustainable bonds guidance, including the Practitioners' Guide on Sustainable Bonds for Nature, an Example Checklist to provide support to users in demonstrating how their projects align with the Green Enabling Projects Guidance document, and a dedicated set of Frequently Asked Questions added as an annex to both the Guidelines for Sustainability-Linked Loans financing Bonds and the Guidance for Green Enabling Projects.

For further information on any of the topics covered in this Bulletin, please contact the authors, or your usual Simmons & Simmons structured products contact.