EMIR, Dodd-Frank & MAR

Question 1

What were the three key aims of the Dodd-Frank Act:

Answer 1

1) Increase transparency
2) Increase liquidity
3) Reduce Counterparty Risk

Question 2

How did the Dodd-Frank act mitigate counterparty risk?

Answer 2

Some OTC derivatives required a central counterparty.

Question 3

What three agencies did the Dodd-Frank act establish?

Answer 3

1) Consumer Financial Protection Bureau - (CFPB)
2) Financial Stability Oversight Council - (FSOC)
3) Office of Financial Research (OFR)

Question 4

What do the CFPB do?

Answer 4

Protect consumer against abuse related to financial products

Question 5

What do the FSOC do?

Answer 5

Monitor and mitigate financial stability risks

Question 6

What do the OFR do?

Answer 6

Support the FSOC through high quality data and analysis

delivering high-quality financial data, standards and analysis principally to support the Financial Stability Oversight Council and its member agencies.

Question 7

What did the Dodd-Frank Act do to existing agencies?

Answer 7

Expanded the responsibilities of the FDIC

Question 8

What were the 3 aims of EMIR?

Answer 8

1) Increase Transparency
2) Mitigate Credit Risk
3) Reduce Operational Risk

Question 9

What does EMIR focus on to enhance transparency?

Answer 9

Trade Repositories

Question 10

Give the 3 ways EMIR enhances transparency

Answer 10

1) Detailed information on contracts must be reported to TRs
2) TRs must publish total positions for each class of derivative
3) Responsibility for supervising TRs lies with FCA and ESMA

Question 11

What 3 things does EMIR do to Mitigate Credit Risk?

Answer 11

1) All standardised OTC derivatives must be cleared through a CCP
2) No CCP, then risk mitigation techniques must be applied.
3) CCPs must adhere to stringent regulation

Question 12

How does EMIR reduce operational risk?

Answer 12

Mandates market participants must “monitor and mitigate operational risks”
- Fraud
- Human error

Question 13

What is meant by EMIR Equivalence Decisions?

Answer 13

Non-EU CCPs and Trade Repositories can be recognised under EMIR.

Allows counterparties to use Non-EU CCPs to adhere to EMIR.

Question 14

The point of MAR was to expand on MAD

What four things did it expand on?

Answer 14

1) Apply to more financial instruments
2) Apply to more trading venues
3) Apply to public at large (not just regulated sector)
4) Made attempted market manipulation a crime (and added benchmarks)

Question 15

What are the four MAR offences?

Answer 15

1) Insider Dealing (including attempted)
2) Inducing another to Insider Deal
3) Unlawfully disclose inside information
4) Market Manipluation (including attempted)

Question 16

What markets does MAR cover?

Answer 16

1) Regulated Markets
2) MTFs & OTFs
3) Assets dependant on the above

Question 17

What gives the FCA the right to apply sanctions?

What sanctions can be applied?

Answer 17

FSMA 2000

1) Unlimited Fine
2) Public Decleration of wrong doing
3) Ban from working within Finance
4) Disgorge Profits
5) Require compensation

Civil Penalties

Question 18

What are the criminal offences that the FCA can take action against?

Answer 18

1) Breaching Listing Rules
2) Making Misleading Statements
3) Market Manipulation
4) Misleading the FCA
5) Insider Dealing
6) Money Laundering

Question 19

What is the offence of insider dealing?

Answer 19

Using inside information to aquire or dispose of an asset to which that information relates

Question 20

Who is an insider?

Someone who has inside information as a result of:

Answer 20

• Being a management, admin or supervisory member of the issuer
• Holding Capital in the Issuer
• Access to information through employment, profession or crimincal activity
• Could reasonably be expected to know it’s inside information

Question 21

What is the offence of recommending another to engage in insider dealing

Answer 21

Encouraging a 3rd party to do the above offence of insider dealing

Question 22

What is the offence of unlawfully disclosing inside information?

Answer 22

Other than in the exercise of normal duties, it is an offence to disclose inside information

Question 23

What is the offence of Market Manipulation

Answer 23

A transaction which:
1) Gives false signal of supply, demand or price
2) Secures the price of an instrument to an abnormal / artificial level
3) Employs a fictitous device

• Disseminating information gives false or misleading signals to the supply demand or price or secures price at an abnormal or artificial level.
• Transmitting false or misleading information which manipulates the calculation of a benchmark.

Question 24

What 4 measures does the FCA have to detect and prevent Market Abuse?

Answer 24

1) Insiders List
2) Disclosure of managers’ deals
3) Suspicious transaction orders reports
4) Research disclosures

Question 25

What are two exemptions to MAR?

Answer 25

1) Stabalisation
2) Buybacks

Question 26

How is EU MAR implemented and by who?

Answer 26

1) Assesses risks to investors
2) A single rulebook for EU financial markets
3) Promotes supervisory convergence
4) Directly supervises credit rating agencies, TRs and SRs.

ESMA