Global Trustee and Fiduciary Services Bite-Sized Issue 2 2024

Global Trustee and Fiduciary Services Bite-Sized | Issue 2 | 2024 7 QUICK LINKS AIFMD ANTI-MONEY LAUNDERING CBDC CRYPTOASSETS CYBERSECURITY FINTECH FSB IOSCO MIFID II/MIFIR OPERATIONAL RESILIENCE SUSTAINABLE FINANCE/ESG ASIA EUROPE LUXEMBOURG NETHERLANDS NORTH AMERICA UNITED KINGDOM • Harnessing the benefits of digital innovation while containing its risks. A key focus for 2024 and beyond is on ensuring the effective implementation of the agreed global regulatory and supervisory framework for crypto-asset activities and markets and for global stablecoin arrangements. The FSB will also complete work on the financial stability implications of tokenisation; prepare a report for the G20 on recent developments in AI and their potential implications for financial stability; and, in its efforts to enhance cyber resilience, design a format for incident reporting exchange to promote greater convergence in financial institutions’ reporting of incidents to financial authorities. • Addressing financial risks from climate change. The FSB will also continue to coordinate international work through its roadmap for addressing climate-related financial risks. Work this year will include analysis of the relevance of transition plans for financial stability and, for the G20, a stocktake of regulatory and supervisory initiatives related to the identification and assessment of nature-related financial risks. The FSB will also prepare a further progress report on achieving consistent climate-related financial disclosures. Link to FSBWork Programme for 2024 here IOSCO IOSCO Seeks Feedback on Post Trade Risk Reduction Services On 26 January 2024 the Board of the International Organization of Securities Commissions (IOSCO) published a consultation report on Post Trade Risk Reduction Services (PTRRS), which identifies potential policy considerations and risks associated with the use and offering of PTRRS associated with over-the-counter (OTC) derivatives trades, and presents sound practices as guidance to IOSCOmembers and regulated users of PTRRS. IOSCO says it is seeking to better assess the risks associated with the increased use of PTRRS and concentration of PTRRS providers, particularly in the areas of portfolio compression and counterparty risk optimisation. The Consultation Report notes that PTRRS offer important benefits, including post-trade operational efficiencies, reduction in counterparty risk and, potentially, an overall reduction in systemic risk. However, PTRRS may pose a number of challenges and risks. For instance, risks relating to market concentration of service providers, a lack of transparency regarding the algorithms used by providers, and a lack of meaningful due diligence by users of PTRRS. Further, while PTRRS are widely used in many jurisdictions, there is limited data received by regulatory authorities, in addition to either limited or no direct regulatory oversight of PTRRS. The consultation period is open until 1 April 2024. Link to Consultation here MIFID II/MIFIR ESMA and NCAs to Coordinate Supervisory Activities on MiFID II Pre-trade Controls On 11 January 2024 the European Securities and Markets Authority (ESMA) launched a Common Supervisory Action (CSA) with National Competent Authorities (NCAs), with the objective of assessing the implementation of pre-trade controls (PTCs) by EU investment firms using algorithmic trading techniques. PTCs are used by investment firms to carry out checks at order entry to limit and prevent sending erroneous orders for execution to trading venues. Following the May 2022 flash crash, ESMA and NCAs have focussed their attention on the implementation of PTCs in the EU, gathering evidence through questionnaires submitted to a sample of EU investment firms. As a follow up, ESMA and NCAs have decided to launch a CSA with the goal of gathering further and more detailed insights on how firms are using PTCs across the EU.