<p>The
European Securities and Markets Authority (<a href=”https://www.financemagnates.com/terms/e/esma/” class=”terms__main-term” id=”1021ff0a-dc50-434e-92f1-f73446cb0ed8″ target=”_blank”>ESMA</a>), the supervisor and regulator
of the financial markets in the European Union, has published a new consultation
paper and is waiting for industry opinions on the methodology on stress test
scenarios for Money Market Funds (MMF).</p><p>ESMA Publishes Consultation
Paper on Stress Test Scenarios</p><p>The
revision proposal considers recent market developments and the stress caused by <a href=”https://www.financemagnates.com/tag/covid/” target=”_blank” rel=”follow”>Covid-19</a> in March 2020 and focuses on changes to the current methodology that
addresses the interaction between liquidity and redemption pressures in the MMF
portfolio and the macroeconomic impact of hypothetical systemic shocks.</p><p><a href=”https://www.esma.europa.eu/sites/default/files/library/ESMA34-49-496_2022_CP_MMF_ST_Methodology.pdf”>The
Consultation Paper highlights</a> two main changes to the current methodology: the first change shows the updated liquidity scenarios after the heightened stress event
experienced due to the shock from Covid; and the second focuses on improving the macro strategy
to more effectively capture its macroprudential impact, with assumptions about
markets and market participants.</p><p>Additionally,
ESMA’s considerations on a potential climate risk scenario are presented,
inviting stakeholders to provide feedback. Industry participants can send their
comments until 28 April 2023, which the regulator assesses in order to
prepare a final report by the end of 2023. The final guidelines for the MMF
stress test are expected to include a calibration of the current testing
scenarios. </p><p>”As
for the proposed addition to the macro scenario, it intends to better capture
the macroprudential impact of the scenario, by including assumptions on the
underlying markets and other market participants. In addition, this Consultation
Paper presents ESMA’s considerations on a potential climate risk scenario,”
ESMA commented.</p><p>According
to ESMA’s press release on Tuesday, the document is aimed mainly at alternative
investment funds, UCITS managers, MMF managers, institutional and retail
investors, and their associations investing in MMFs.</p><p>Watch the recent FMLS22 regulation roundup.</p><p>ESMA to Issue Guidance on
Market Outage</p><p>Last year, ESMA collected similar feedback and industry comments on the impact of
ineffective communication on trading venues during power outages. Therefore, the
regulator <a href=”https://www.financemagnates.com/institutional-forex/esma-to-issue-guidance-on-market-outage-asks-for-stakeholders-input/” target=”_blank” rel=”follow”>intends to publish a guidance report this quarter</a> showing how trading
venues should communicate with market participants in the event of any
<a href=”https://www.financemagnates.com/terms/l/liquidity/” class=”terms__secondary-term” id=”47c3bef3-27ee-4953-8504-159e1b829b33″ target=”_blank”>liquidity</a> problems.</p><p> “In fact, data show that when the primary
market is down, trading on alternative lit venues also drops in the same
proportion as that on the primary market, even though these alternative venues
could be used to ensure continuity of trading,” ESMA stated in September 2022.</p><p>Better
communication with market participants would reduce their uncertainty and allow
traders to be informed more efficiently when regular trading would resume. As a
result, the fall-out on alternative venues should be less acute.</p><p>In late
December, <a href=”https://www.financemagnates.com/institutional-forex/regulation/esma-releases-final-report-on-guidelines-for-reporting-under-emir-refit/” target=”_blank” rel=”follow”>the entity published its final report</a> on the guidelines and technical
standards for reporting under the European Market Infrastructure Regulation
(EMIR), which will take effect in April 2024.</p><p>ESMA Heralds New Logo and
Website</p><p>The European
Union regulator focuses on continuous improvement of the investment markets
and on building better brand awareness. To reach the public more frequently, <a href=”https://www.financemagnates.com/fintech/esma-unveils-new-logo-plans-new-website-launch/” target=”_blank” rel=”follow”>ESMA
unveiled a new visual identity in early 2023</a> with a new logo to reflect its
strategic plans for the next five years. </p><p>The
regulator launched a new website with a refreshed design and enhanced
functionalities three weeks later.</p><p>”The
design of the new logo fully embraces the ESMA Strategy for 2023-2028 and its
key twin drivers: sustainability as well as technological and data innovation,”
ESMA commented.</p>
This article was written by Damian Chmiel at www.financemagnates.com.
