Esma Grows in Stature As Regulatory Workload Increases

Terry Flanagan

Regulation, regulation and, it seems, yet more regulation is on the cards for 2013—especially in Europe.

The European Securities and Markets Authority, the Paris-based pan-European regulator,
was only formed in January 2011 in response to the financial crisis so that it could better protect investors by promoting stable and well-functioning financial markets in the European Union, as well as the consistent application of laws across the region.

But in the two years since its inception it has already developed more muscle and power than its predecessor, the Committee of European Securities Regulators, much to the chagrin of many national watchdogs.

And on top of this, its work program for 2013 looks onerous to say the least. Esma itself has said that its staff numbers “are expected to grow from 101 to 160 and the budget from €20.2 million to approximately €28 million” in order for Esma to deliver on this.

This probably means that the speed of regulation will also increase, too. In 2012, Esma was, among other things, tasked with writing detailed technical standards for Emir, which was the EU’s regulatory attempt at reducing systemic risk and adding transparency to the vast but opaque derivatives sector.

Many in the industry believed that Esma just did not have enough time to deliver on Emir, worrying about the possible unintended consequences it may cause. Even Steven Maijoor, the chairman of Esma, acknowledged as much in July, stating that 33 weeks was not enough to complete the work, even though Esma eventually delivered the standards on time to the European Commission.

“The ambitious timescales achieved in 2012 when producing the Emir technical standards may have set a precedent and we could see the pace quickening, especially as Esma actively grows their resource pool to match their increasingly powerful remit,” said Anne Plested, who heads up the regulation change program for Fidessa in Europe, in a recent blog.

Among many other things, Esma’s 2013 program is looking to tackle the review of MiFID, which is possibly the most important piece of securities legislation to hit the EU since its first coming in 2007.

“In 2013 this task of building a single rulebook for Europe will see the continuing revision of MiFID, which will be replaced by a revised directive and a new regulation, MiFID II and MiFIR, and the revision of the Market Abuse Directive,” said Verena Ross, executive director of Esma, at a December conference in London

“These texts both form part of the European Union’s key reforms in response to the financial crisis. Other planned legislation includes CRA [Credit Rating Agencies] III; the revision of the Transparency Directive; regulations on Venture Capital and Social Entrepreneurship Funds and the Central Securities Depositories Directive. In support of implementing this legislation, and creating a single rulebook, Esma will develop draft technical standards, guidelines and advice.”

Esma is also beginning to realize the stature it is developing among other global regulators, and the future role it is likely to play in shaping financial markets.

“Esma now has a much wider remit and stronger powers,” said Maijoor of Esma at a December speech in Paris.

He added: “From a more international perspective, the Esma regulation foresees a more active role for Esma in international relations by developing contacts and entering into administrative arrangements with supervisory authorities, international organizations and the administrations of third countries.”

Despite this, some market participants believe Esma to be drowning under a sea of acronyms with its ever increasing workload.

“Whether Esma is fully equipped and has the staff and time to design the new regulatory framework is hotly debated,” a source told Markets Media.

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