Global Trustee and Fiduciary Services Bite Sized Issue 12 2024

6 QUICK LINKS COSTS & CHARGES CSDR CRYPTOASSETS EMIR FINTECH FSB FUND LIQUIDITY MIFID II/MIFIR NBFI OPERATIONAL RESILIENCE SUSTAINABLEFINANCE/ESG T+1 ASIA NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 12 | 2024 Originally published in 2018, IOSCO’s Liquidity Risk Management (LRM) Recommendations were published in response to the FSB’s 2017 Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities that aimed to address structural vulnerabilities from liquidity mismatch in open-ended funds. The Revised LRM Recommendations take into consideration the FSB’s revised Recommendations to Address Structural Vulnerabilities from Liquidity Mismatch in Open-Ended Funds (Revised FSB Recommendations) from December 2023, as well as recent market events such as the COVID-induced market volatility and those following the war in Ukraine. The proposals consist of 17 recommendations organised into a revised structure with six sections, namely the CIS Design Process, Liquidity Management Tools and Measures, Day-to-Day Liquidity Management Practices, Stress Testing, Governance and Disclosures to Investors and Authorities. The key proposed revisions to the LRM Recommendations correspond to the targeted revisions from the Revised FSB Recommendations and can be grouped into four main areas: • Categorising open-ended funds (OEFs) based on the liquidity of their assets. • Encouraging investment managers to implement a broad set of liquidity management tools (LMTs) and other liquidity management measures. • Emphasising the importance of anti-dilution LMTs to mitigate material investor dilution and potential first-mover advantage arising from structural liquidity mismatch in OEFs. • Incorporating new guidance on quantity-based LMTs and other liquidity management measures. The accompanying Implementation Guidance, also for consultation, sets out technical elements focusing on open-ended funds, such as the determination of asset and portfolio liquidity and considerations relating to the calibration and activation of LMTs and other liquidity management measures. The proposed Revised LRM Recommendations and the proposed Implementation Guidance incorporate IOSCO’s Anti-dilution Liquidity Management Tools – Guidance for Effective Implementation of the Recommendations for Liquidity Risk Management for Collective Investment Schemes published in 2023 and should be read in conjunction with each other for completeness. Consultation feedback is requested by 11 February 2025. IOSCO aims to publish its Final Report in the first half of 2025. Link to Consultation here Link to Implementation Guidance here MIFID II/MIFIR FCA Direction to Modify the UK’s Derivatives Trading Obligation On 29November 2024, the Financial Conduct Authority (FCA) announced it was updating the direction modifying the UK’s derivatives trading obligation (DTO) from 11.01pm on 31 December 2024. The updated direction will replace the transitional direction which is expiring. The new direction will continue to allow firms subject to the UK DTO, trading with, or on behalf of, EU clients subject to the EU DTO, to transact or execute those trades on EU venues, providing they meet certain conditions. The same conditions set out in the transitional direction apply. This includes that firms must take reasonable steps to be satisfied the client does not have arrangements in place to execute the trade on a trading venue to which both the UK and EU have granted equivalence.