Activities of Eva KAILI related to 2020/0267(COD)
Plenary speeches (1)
Pilot regime for market infrastructures based on distributed ledger technology (debate)
Shadow reports (1)
REPORT on the proposal for a regulation of the European Parliament and of the Council on a pilot regime for market infrastructures based on distributed ledger technology
Amendments (100)
Amendment 139 #
Proposal for a regulation
Recital 1
Recital 1
(1) The European Commission’s communication on a Digital Finance Strategy32 aims to ensure that the Union financial services legislation is fit for the digital age and contributes to a future- ready economy that works for the people, including by enabling the use of innovative technologies. The Union has a policy interest in developing and promoting the uptake of transformative technologies in the financial sector, such as blockchain and distributed ledger technology (‘DLT’). Crypto-assets are one of the main DLT applications for finance. DLT comprises a diverse set of solutions that combine database technology and cryptography in order to tackle malicious behavior and address the risk that different users rely on inconsistent versions of the data due to network latency or the validation of conflicting forks, by allowing ultimate cryptographic auditing of users’ activity and by providing traditional and new mechanisms to achieve consensus among users on the status of the database over time. _________________ 32Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee and the committee of the Regions on a Digital Finance Strategy for EU COM(2020)591
Amendment 141 #
Proposal for a regulation
Recital 2
Recital 2
(2) The majority of crypto-assets fall outside of the scope of EU legislation and raise, among others, challenges in terms of investor protection, market integrity and financial stability. They therefore require a dedicated regime at Union level. By contrast, other crypto-assets qualify as financial instruments within the meaning of Directive 2014/65/EU of the European Parliament and of the Council (Markets in Financial Instruments Directive, MiFID II)33 . In so far as a crypto-asset qualifies as a financial instrument under that Directive, a full set of Union financial rules, including Regulation (EU) 2017/1129 of the European Parliament and of the Council (the Prospectus Regulation)34 , Directive 2013/50/EU of the European Parliament and of the Council (the Transparency Directive)35 , Regulation (EU) No 596/2014 of the European Parliament and of the Council (the Market Abuse Regulation)36 , Regulation (EU) No 236/2012 of the European Parliament and of the Council (the Short Selling Regulation)37 , Regulation (EU) No 909/2014 of the European Parliament and of the Council (the Central Securities Depositories Regulation)38 and Directive 98/26/EC of the European Parliament and of the Council (the Settlement Finality Directive)39 may apply to its issuer and firms conducting activities related to it. The so-called tokenisation of financial instruments, that is to say their transformation into crypto-assetsdigital representation on distributed ledgers or the issuance of traditional asset classes in tokenised form to enable them to be issued, stored and transferred on a distributed ledger, is expected to open up opportunities for efficiency improvements in the entire trading and post-trading area. Distributed ledger technology (DLT) has the potential of promoting the sharing of data and business processes beyond the level achieved by current distributed databases, which have been used to date in order to allow participants spread across locations to read the content of a collection of data managed by a single institution. DLT is intended to bring value to market participants by allowing different institutions to share the management of information in a distributed ledger and to follow the same procedures to update that information. Each entity involved in the processing of financial transactions currently keeps an independent central record of its clients’ asset holdings and needs to reconcile that record with data kept in other centrally managed databases at different levels of the post-trading value chain. DLT could facilitate integration in post-trading by providing an infrastructure ensuring that every user has a consistent and updated view of the assets for which it is responsible and that the same assets can be transferred with a high degree of automation. _________________ 33Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349). 34Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (OJ L 168, 30.6.2017, p. 12) 35 Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013 amending Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and Commission Directive 2007/14/EC laying down detailed rules for the implementation of certain provisions of Directive 2004/109/EC (OJ L 294, 6.11.2013, p. 13) 36Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 12.6.2014, p. 1) 37Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (OJ L 86, 24.3.2012, p. 1). 38Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1) 39Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (OJ L 166, 11.6.1998, p. 45)
Amendment 144 #
Proposal for a regulation
Recital 3
Recital 3
(3) The Union financial services legislation was not designed with DLT and crypto-assets in mind40 , and there are provisions in existing EU financial services legislation that may preclude or limit the use of DLT in the issuance, trading and settlement of crypto-assets which qualify as financial instruments. There is also currently a lack of authorised financial market infrastructures using DLT and providing trading and settlement services for crypto-assets that qualify as financial instruments. Without a secondary market able to provide liquidity and to enable investors to buy and sell such assets, the primary market for crypto-assets that qualify as financial instruments will never expand in a sustainable way. _________________ 40European Securities and Markets Authority’s, Report with advice on Initial Coin Offerings and Crypto-Assets (ESMA50-157-1391)
Amendment 145 #
Proposal for a regulation
Recital 3 a (new)
Recital 3 a (new)
(3 a) In order to achieve a uniform Union digital financial market of security tokens and tokenised assets in general, the differences that exist across the national regimes of the Member States should be taken into consideration, including differences in the transposition of Union directives, such as Directive 2014/65/EU of the European Parliament and the Council (MiFIDII). According to ESMA's January 2019 opinion on ICOs and crypto-assets, one of the main obstacles to regulating crypto-assets with investment characteristics in a uniform manner across the Union is the transposition divergencies of Union directives into national law, such as the definition of 'financial instrument' or of 'transferable security', or the legal analysis and requirements in respect of investment services, activities and ancillary services, including the custody and administration of financial instruments on behalf of clients, or recordkeeping on behalf of security token issuers. It is of utmost importance to initiate discussions at Union level on the harmonisation of the national regimes in order to increase legal certainty and meet the goals of CMU while enabling the emergence of a competitive Union digital market of security tokens and tokenised assets in general.
Amendment 146 #
Proposal for a regulation
Recital 3 b (new)
Recital 3 b (new)
(3 b) As regards the DLT landscape, at least the following specific types of DLT can be identified at present: (1) blockchains, where any changes to the identities of current users entitled to send an unspent transaction output (UTXO) representing asset holdings are processed in batches (blocks) which are then linked together via cryptographic techniques (hashing); (2) consensus ledgers, where snapshots of balances associated with each use are updated in rounds; and (3) synchronised bilateral ledgers, where counterparties can update the subset of information that refers directly to their bilateral activity, possibly with other elected parties also accessing these records, and make some of that information available to a broader set of users. Smart contracts are another type of technology that can be associated with DLTs when they are processed across nodes in the network. Those contracts are written as executable code. Under the contracts, the counterparties certify that the respective assets are to be sent or received on their behalf via automated procedures that are processed when a set of pre-specified events happen either inside the ledger (for example, holding balance of a user) or outside the ledger (for example, asset price).
Amendment 148 #
Proposal for a regulation
Recital 4
Recital 4
(4) At the same time, regulatory gaps exist due to legal, technological and operational specificities related to the use of DLT and crypto-assets that qualify as financial instruments. For instance, there are no transparency, reliability and safety requirements imposed on the protocols and smart contracts underpinning crypto-assets that qualify as financial instruments. The underlying technology could also pose some novel forms of cyber risks that are not appropriately addressed by existing rules. Several projects for the trading and post-trading of crypto-assets qualifying as financial instruments have been developed in the Union, but few are already in operation or they have limited scale. Given this limited experience as regards the trading and post-trading of transactions in crypto-assets that qualify as financial instruments, it would currently be premature to bring significant modifications to the Union financial services legislation to enable the full deployment of such crypto-assets and their underlying technology. At the same time, the creation of financial market infrastructures for crypto-assets that qualify as financial instruments is currently constrained by some requirements embedded in the Union’s financial services legislation that wouldare not be fully adapted to crypto-assets qualifying as financial instruments and to the use of DLT. For instance, trading platforms for crypto- assets usually give direct access to retail investors, while traditional trading venues usually give access through financial intermediaries.
Amendment 151 #
Proposal for a regulation
Recital 5
Recital 5
(5) In order to allow for the development of crypto-assets that qualify as financial instruments and DLT, while preserving a high level of financial stability, market integrity, transparency and investor protection, it would be useful to create a pilot regime for DLT market infrastructures. A pilot regime for DLT market infrastructures should allow such DLT market infrastructures to be temporarily exempted from some specific requirements under the Union financial services legislation that could otherwise prevent them from developing solutions for the trading and settlement of transactions in crypto-assets that qualify as financial instruments. The main contribution of the pilot regime should be to test the avoidance of “intermediation” through CSDs when registering securities, by allowing registration on the blockchain. Much of the regulatory rationale behind Regulation (EU) No 909/2014 (CSDR) is to ensure trust, regarding investor protection and market integrity, following a trusted third party (TTP) approach. The aim of the pilot regime should be to allow for that approach to be redefined to one of confidence, by helping understand how new models of blockchain or DLT-based confidence should be built. The pilot regime should also enable the European Securities and Markets Authorities (ESMA) and competent authorities to gain experience on the opportunities and specific risks created by crypto-assets that qualify as financial instruments, and by their underlying technology, with a view to identifying the necessary targeted amendments to the existing Union legal framework as regards the issuance, safekeeping and asset servicing, trading and settlement of financial instruments based on DLT.
Amendment 159 #
Proposal for a regulation
Recital 6
Recital 6
(6) To meet this objective, a new Union status of DLT market infrastructures should be created in order to ensure that the Union is able to maintain its competitive lead regarding tokenised assets and to contribute to the development of a secondary market for those assets. This status of DLT market infrastructure should be optional and should not prevent financial market infrastructures, such as trading venues, central securities depositories and central counterparties, from developing trading and post-trading services and activities for crypto-assets which qualify as financial instruments or are based on DLT, under the existing Union financial services legislation.
Amendment 162 #
Proposal for a regulation
Recital 7
Recital 7
(7) A DLT market infrastructure should be defined either as a DLT multilateral trading facility (DLT MTF) or a DLT securities settlement system. Those DLT market infrastructures should be able to cooperate with other market participants to find innovative solutions based on DLT on each segment of the value chain of the financial services.
Amendment 163 #
Proposal for a regulation
Recital 8
Recital 8
(8) A DLT MTF should be a multilateral trading facility that is operated by an investment firm or a market operator that operate the business orf a regulated market and maybe the regulated market itself, authorised under Directive 2014/65/EU (Markets in Financial Instruments Directive, MiFID II), and that has received a specific permission under this Regulation. Such aA DLT MTF and its operator should be subject to all the requirements applicable to a multilateral trading facility and its operator under the framework of Directive 2014/65/EU (Markets in Financial Instruments Directive, MiFID II), Regulation EU No 600/2014 of the European Parliament and of the Council (the Markets in Financial Instruments Regulation, MiFIR)41 , or any other EUapplicable Union financial services legislation, except if ithe DLT MTF has been granted one or several exemptions by its national competent authority, in accordance with this Regulation and Directive (EU) .../... of the European Parliament and of the Council42 . New market participants or regulated entities, such as investment firms or credit institutions, that wish to operate a DLT MTF under this Regulation, should be allowed to follow a one-step application procedure by applying to their national competent authority to be authorised under Directive 2014/65/EU(MiFID II) and stating at the same time any exemption that they wish to be granted, in accordance with this Regulation and with Directive (EU) .../... of the European Parliament and of the Council. _________________ 41Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (OJ L 173, 12.6.2014, p. 84) 42Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2009/65/EC, 2009/138/EU, 2011/61/EU, EU/2013/36, 2014/65/EU, (EU) 2015/2366 and EU/2016/2341 - COM(2020)596
Amendment 169 #
Proposal for a regulation
Recital 9
Recital 9
(9) The use of distributed ledger technology, with all transactions recorded in a decentralised ledgerdigital database, can expedite and condense trading and settlement to nearly real-time and could enable the merger of trading and post- trading activities. However, the current rules envisage the performance of trading and settlement activities by separate market infrastructures. Regulation (EU) No 909/2014 of the European Parliament and of the Council (the Central Securities Depositories Regulation) requires that financial instruments admitted to trading on a trading venue within the meaning of Directive 2014/65/EU (Market in Financial Instruments Directive, MiFID II) be recorded with a central securities depositary (‘CSD’), while a distributed ledger could be potentially used as a decentralised versiondatabase of such a depository. Therefore, it would be justified to allow a DLT MTF to performmarket infrastructure to combine some activities normally performed by aboth MTFs and CSDs. Therefore, when granted the relevant exemption(s), a DLT MTF and resulting permission, a DLT market infrastructure should be allowed to ensure the initial recording and trading of DLT transferable securities, the settlement of transactions in DLT transferable securities and the safekeeping of DLT transferable securities leveraging distributed ledger technology.
Amendment 174 #
Proposal for a regulation
Recital 10
Recital 10
(10) A DLT securities settlement system should be a securities settlement system operated by a CSD authorised under Regulation (EU) No 909/2014 (the Central Securities Depositories Regulation) that has received a specific permission under this Regulation. A DLT securities settlement system, and the CSD operating it, should be subject to the relevant requirements of Regulation (EU) No 909/2014 (the Central Securities Depository Regulation), except where the national competent authority has granted the CSD operating the DLT securities settlement system with one or several exemptions, in accordance with this Regulation. New market participants or regulated entities, such as investment firms or credit institutions, that wish to operate a DLT SSS under this Regulation should be allowed to follow a one-step application procedure by applying to their national competent authority to be authorised under Regulation (EU) No 909/2014 (CSDR) and stating at the same time any exemption that they wish to be granted, in accordance with this Regulation and with Directive (EU) .../... of the European Parliament and of the Council.
Amendment 177 #
Proposal for a regulation
Recital 11
Recital 11
(11) A DLT MTF or a CSD operating a DLT securities settlement systemSSS should only admit to trading or record DLT transferable securities on theira distributed ledger. DLT transferable securities should be crypto-assets that qualify as ‘transferable securities’ within the meaning of Directive 2014/65/EU (the Market in Financial Instruments Directive, MiFID II) and that are issued, transferred and stored on a distributed ledger. This Regulation should specify the DLT transferrable securities eligible to be traded or recorded.
Amendment 181 #
Proposal for a regulation
Recital 12
Recital 12
(12) In order to allow innovation and experimentation in a sound regulatory environment while preserving financial stability, the type of transferable securities admitted to trading on a DLT MTF or recorded in a CSD operating a DLT securities settlement system should be limited to securities, such as shares and bonds that are not liquidr recorded on a DLT market infrastructure should be limited to securities, such as shares, bonds, including sovereign bonds, and exchange-traded funds (ETFs) up to the value of the thresholds set out in this Regulation. In order to determine whether a share or, bond, ETF, UCIT or AIF is liquid or not, this Regulation should set some value thresholds. To avoid the creation of any risk to financial stability, the total market value of DLT transferable securities recorded by a CSD operating a DLT securities settlement systemSSS, or admitted to trading by a DLT MTF, should also be limited. DLT market infrastructures should also be prevented from admitting to trading or recording on the distributed ledger sovereign bonds. To verify that the DLT transferable securities traded on or recorded by a DLT market infrastructure meets the conditions imposed under this Regulation throughout the period of their permitted participation in the pilot regime, national competent authorities should be allowed to require such DLT market infrastructures to submit reports on a regular basis, as provided for in this Regulation.
Amendment 186 #
Proposal for a regulation
Recital 14
Recital 14
(14) A DLT MTF should be able to request one or several exemptions on a temporary basis, as listed under this Regulation, to be granted by the competent authority, following a recommendation issued by ESMA, if it complies with the conditions attached to such exemptions as well as additional requirements set under this Regulation to address novel forms of risks raised by the use of DLT. The DLT MTF should also comply with any compensatory or corrective measure imposed by the competent authority, or recommended by ESMA, in order to meet the objectives pursued by the provision for which an exemption has been requested.
Amendment 189 #
Proposal for a regulation
Recital 15
Recital 15
(15) Where a financial instrument is admitted to trading on an MTF, it is to be recorded with an authorised Central Securities Depository (CSD) in accordance with Regulation (EU) No 909/2014 (the Central Securities Depository RegulationSDR). While the recording of a transferable security and the settlement of related transactions could potentially take place on a distributed ledger, Regulation (EU) No 909/2014 imposes an intermediation by a CSD and would oblige to replicate the recording on the distributed ledger at the CSD level, potentially imposing a functionally redundant overlay to the trade lifecycle of a financial instrument handled by DLT market infrastructures subject to this Regulation. Therefore, a DLT MTF should be able to request an exemption of the book-entry requirement and the recording with a CSD set by Regulation (EU) No 909/2014, where the DLT MTF complies with equivalent requirements to those applying to a CSD. The DLT MTF should record the transferable securities on itsa distributed ledger, ensure the integrity of the issues on the distributed ledger, establish and maintain procedures to ensure the safekeeping of the DLT transferable securities, complete the settlement of transactions, and prevent settlement fails.
Amendment 191 #
Proposal for a regulation
Recital 16
Recital 16
(16) Where performing the settlement of transactions in DLT transferable securities, the DLT MTF should ensure that the payment for DLT transferable securities from the buyer occurs at the same time as DLT transferable securities are delivered from the seller (dDelivery versus pPayment, DvP). Where practicable and available, the cash payments leg should be settled through central bank money and, where not practicable or available, through commercial bank money. In order to test innovative solutions and to allow for the cash payments leg to occur on a distributed ledger, the DLT MTFs should also be allowed to use so- called settlement coins, that is to say commercial bank money in a tokenised form, or e-money tokens (EMTs) as defined in the Regulation No 2021/XX on Markets in Crypto-Assets43 . Where using commercial bank money for cashthe payments leg, the DLT MTF should limit counterparty risk by establishing and monitoring adherence by the credit institutions used for the settlement of cash payments to strict criteria, such as their regulation and supervision, creditworthiness, capitalisation, access to liquidity and operational reliability. _________________ 43Proposal for a Regulation ofWhere using EMTs for the payment leg, participants in a DLT MTF should be able to open accounts directly with the DLT MTF for the Epuropean Parliament and of the Councilposes of settling the payment leg in EMTs, or alternatively the DLT MTF and its participants should be able to open an account with a third party providing services relating to EMTs. In those cases, the DLT MTF or the third party should be the issuer of EMTs and should ensure that settlement of the payment leg takes place in EMTs. Since EMTs can only be issued either by credit institutions or e-money institutions under Regulation No2021/XX on Markets in Crypto-aAssets, and amending Directive (EU) 2019/1937– COM(2020)593the exemption provided under this Regulation with respect to the payment settlement provisions of the CSDR is not intended to exempt a DLT MTF, or a third party issuing EMTs and settling the payment leg of securities transactions through its own accounts, from the licensing requirements under Regulation No 2021/XX on Markets in Crypto-Assets.
Amendment 192 #
Proposal for a regulation
Recital 18
Recital 18
(18) To be granted an exemption under this Regulation, the DLT MTF should demonstrate that the requested exemption is proportionate and limited to the use of DLT as described in its business plan and that the exemption requestedrequested exemption is limited to the DLT MTF and not extended to any other MTF operated by the same investment firm or market operator. Furthermore, if the operator of the DLT MTF operates any other MTF, it should be demonstrated that the operations of the DLT MTF will not affect, under any circumstances, the operations and robustness of any other MTF, for instance, where one or more entities participate in both a regular MTF and a DLT MTF operated by the same operator. In those circumstances, the DLT MTF operator should clearly explain the insolvency and settlement finality risks to which its participants are exposed, as well as any measures that it has put in place in order to mitigate such risks.
Amendment 194 #
Proposal for a regulation
Recital 19
Recital 19
(19) A CSD operating a DLT securities settlement systemSSS should be able to request one or several exemptions on a temporary basis, as listed under this Regulation, to be granted by the relevant competent authority following the recommendation issued by ESMA, if it complieds with the conditions attached to such exemptions as well as additional requirements set out under this Regulation to address novel forms of risks raised by the use of DLT. The CSD operating the DLT securities settlement systemSSS should also comply with any compensatory or corrective measure imposed by the competent authority, or recommended by ESMA, in order to meet the objectives pursued by the provision for which an exemption has been requested.
Amendment 196 #
Proposal for a regulation
Recital 20
Recital 20
(20) A CSD operating a securities settlement systemSSS should be allowed to request exemptions from different provisions that are likely to create regulatory obstacles for the development of settlement securities systems for transferable securities. For instance, a CSD should be able to request an exemption from some definitions of Regulation (EU) 909/2014 (the Central Securities Depositories Regulation), such as the notion of ‘dematerialised form’, ‘security account’, ‘transfer orders’ as well as exemptions from provisions which refers to the notion of ‘security account’, such as the rules on the recording of securities, integrity of issue or segregation of accounts. CSDs operate securities settlement systemSSS by crediting and debiting the securities accounts of its participants. However, double-entry (or multiple-entry) book keepings securities accounts may not always exist in a DLT system. Therefore, a CSD operating a DLT securities settlements systemSSS should be able to request an exemption from the rules referring to the notion of ‘securities account’ or ‘book- entry form’ should it be necessary to allow the recording of DLT transferable securities on a distributed ledger,. However, any CSD operating a DLT SSS should still be required to ensure the integrity of the DLT transferable security issue on the distributed ledger and the segregation of the DLT transferable securities belonging to various participants.
Amendment 198 #
Proposal for a regulation
Recital 21
Recital 21
(21) Under Regulation (EU) No 909/2014 (the Central Securities Depositories RegulationSDR), a CSD can only outsource one of its core activities, after receiving an authorisation from the competent authority. The CSD is also required to respect several conditions, so that the outsourcing does not result in a delegation of its responsibility or in a modification of the obligations of the CSD towards its participants or issuers. Depending on its business plan, a CSD operating a DLT securities settlement systemSSS could be willing to share the responsibility of runnoperating its distributed ledger on which the transferable securities are recorded with other entities, including with its participants. The DLT securities settlement systemCSD operating a DLT SSS should be able to request an exemption from the outsourcing requirements to develop such innovative business models. In such a case, they should demonstrate that the provisions on outsourcing are incompatible with the use of DLT as envisaged in their business plan and they should also demonstrate that some minimum requirements on outsourcing are met.
Amendment 201 #
Proposal for a regulation
Recital 22
Recital 22
(22) The obligation of intermediation through a credit institution or an investment firm so that retail investors are not able to obtain direct access to the settlement and delivery systems operated by a CSD could potentially create a regulatory obstacle to the development of alternative models of settlement based on a DLT that allow direct access by retail clients. Therefore, the CSD operating a DLT securities settlement systemSSS should be allowed to request an exemption from the notion of participant, as set out by Regulation (EU) No 909/2014 (the Central Securities Depositories RegulationSDR). Where seeking an exemption from the obligation of intermediation under Regulation (EU) No 909/2014 (the Central Securities Depositories Regulation), the CSD operating a securities settlement systemSDR), the CSD operating a SSS should ensure that these persons are of sufficient good repute and fit and proper for the purpose of anti-money laundering and combatting the financing of terrorism. The CSD operating the securities settlement systemSSS should also ensure that these participants have sufficient level of ability, competence, experience and knowledge of post-trading and the functioning of DLTs.
Amendment 202 #
Proposal for a regulation
Recital 23
Recital 23
(23) The entities that are eligible to participate in a CSD covered by Regulation (EU) No 909/2014 (the Central Securities Depositories RegulationSDR) are based on the entities that are eligible to participate in a securities settlement systemSSS that is designated and notified in accordance with Directive 98/26/EC (the Settlement Finality Directive), SFD), because Regulation (EU) No 909/2014 (the Central Securities Depositories RegulationSDR) requires securities settlement systems operated by CSDs to be designated and notified under Directive 98/26/EC. A DLT securities settlement systemSSS that applies to be exempted from the participation requirements of Regulation (EU) No 909/2014 (the Central Securities Depositories RegulationSDR) would not be compliant with the participation requirements of Directive 98/26/EC. Consequently, such a DLT securities settlement systemSSS could not be designated and notified under that Directive. However, this would not preclude a DLT securities settlement system that complies with all of the requirements of Directive 98/26/EC from being so designated and notified. SSS that complies with all of the requirements of Directive 98/26/EC from being so designated and notified. Moreover, if a DLT SSS does not equate to the operation of a ‘system’ as defined under the Settlement Finality Directive, not least because natural persons are eligible participants in a DLT SSS, the insolvency protections thereunder should not be able to apply to the DLT SSS itself. Moreover, if the operator of the DLT SSS operates any other CSD, it should be demonstrated that the operations of the DLT SSS will not affect, under any circumstances, the operations and robustness of any other CSD, for instance, where one or more entities participate in both a regular SSS and a DLT SSS operated by the same CSD. In those circumstances, the CSD operating the DLT SSS should clearly explain the insolvency and settlement finality risks to which its participants are exposed, as well as the measures that have been put in place in order to mitigate such risks.
Amendment 203 #
Proposal for a regulation
Recital 24
Recital 24
(24) Regulation (EU) No 909/2014 (the Central Securities Depositories RegulationSDR) encourages the settlement of transactions in central bank money. Where the settlement of cashthe payments leg in central bank money is not available and practicable, this settlement can take place in commercial bank money. That provision can be difficult to apply for a CSD operating a DLT securities settlement systemSSS, as such a CSD would have to effect movements in cash accounts at the same time as the delivery of securities on the DLTdistributed ledger. A CSD operating a DLT securities settlement systemSSS should be allowed to request an exemption from the rules of Regulation (EU) No 909/2014 (the Central Securities Depositories Regulation) on cash settlement in order to develop innovative solutions, such as the use of settlement coins or ‘e-money tokens’ (EMTs) as defined in the Regulation No 2021/XX on Markets in Crypto-Assets45 . _________________ 45Proposal for a Regulation of the European Parliament and of the Council on markets in crypto-assets, and amending Directive (EU) 2019/1937 – COM(2020)593. Where using EMTs for the payment leg, participants in a DLT SSS should be able to open accounts.
Amendment 204 #
Proposal for a regulation
Recital 24 a (new)
Recital 24 a (new)
(24 a) Natural persons could directly participate in DLT market infrastructures and if the payment leg of DLT transferable securities transactions were to occur on the books of a person who is not a licensed credit institution, the result would be cash accounts being held by natural persons as well by legal persons such as micro, small and medium-sized enterprises, with DLT market infrastructures not benefiting from the deposit guarantee scheme protection under Directive 2014/49/EU of the European Parliament and of the Council (the Deposit Guarantee Schemes Directive, DGSD) and from the depositor preference under Directive 2014/59/EU of the European Parliament and of the Council (the ‘BRRD’). The DGSD and the depositor preference under the BRRD only apply to deposits in the form of a credit balance which results from funds left in an account or from temporary situations deriving from normal banking transactions and which a credit institution is required to repay. In those circumstances, DLT market infrastructures should explicitly disclose to their participants that they are not protected under the relevant DGSD and BRRD provisions.
Amendment 205 #
Proposal for a regulation
Recital 25
Recital 25
(25) Regulation (EU) No 909/2014 (the Central Securities Depositories RegulationSDR) requires that a CSD gives access to another CSD or to other market infrastructures. The access to a CSD operating a DLT securities settlement system can beSSS can be technically more challenging, burdensome or difficult to achieve, as the interoperability of legacy systems with DLT has not been tested yet. A DLT securities settlement systemSSS should also be able to request an exemption from such rules, if it can demonstrate that the application of such rules areis disproportionate to the size of the DLT securities settlement systemSSS.
Amendment 206 #
Proposal for a regulation
Recital 26
Recital 26
(26) Irrespective of the rule for which an exemption is requested, a CSD operating a DLT securities settlement systemSSS should demonstrate that the exemption requested is proportionate and justified by the use of DLT. The exemption should also be limited to the DLT securities settlement system and not cover other securities settlement systemSSS and not cover other SSSs operated by the same CSD.
Amendment 207 #
Proposal for a regulation
Recital 27
Recital 27
(27) DLT market infrastructures and their operators should also be subject to additional requirements, compared to traditional market infrastructures. These requirements are necessary to avoid risks raised by the use of DLT or by the new way the DLT market infrastructure would carry out its activities. Therefore, DLT market infrastructures and their operators should establish a clear business plan that details how the DLT would be used and the legal arrangements put in place.
Amendment 210 #
Proposal for a regulation
Recital 28
Recital 28
(28) A CSD operating a DLT securities settlement systemSSS, or a DLT MTF where they are permitted to settle the transactions in DLT transferable securities themselves, should establish or document the rules on the functioning of the proprietary DLTdistributed ledger they operate, including the rules to access and admission on the DLTdistributed ledger, the rules for the participating nodes and the rules to address potential conflicts of interest, as well as risk management measures.
Amendment 212 #
Proposal for a regulation
Recital 29
Recital 29
(29) A DLT market infrastructure should be required to inform members, participants, issuers and clients on how ithey intends to perform theirits activities and how the use of DLT will create deviations compared to the way the service is normally provided by a traditional MTF or a CSD operating a securities settlement systemn SSS.
Amendment 215 #
Proposal for a regulation
Recital 30
Recital 30
(30) A DLT market infrastructure should have specific and robust IT and cyber arrangements related to the use of DLT. These arrangements should be proportionate to the nature, scale and complexity of the DLT market infrastructure’s business plan. These arrangements should also ensure the continued reliability, continuity and security of the services provided, including the reliability of smart contracts that are potentially used, either created by the DLT market infrastructure itself or by a third party following contractual outsourcing procedures. DLT market infrastructures should also ensure the integrity, security, confidentiality, availability and accessibility of data stored on the DLT. The competent authority of a DLT market infrastructure should be allowed to requestmandate compliance with certain standards fit for DLT operations or an audit to ensure that the overall IT and cyber arrangements are fit for purpose. The costs of such compliance with standards or of such an audit should be borne by the DLT market infrastructure.
Amendment 217 #
Proposal for a regulation
Recital 31
Recital 31
(31) Where the business plan of a DLT market infrastructure would involve the safekeeping of clients’ funds, such as cash or cash equivalent, or DLT transferable securities, or the means of access to such DLT transferable securities, including in the form of cryptographic keys, the DLT market infrastructure should have adequate arrangements in place to safeguard their clients’ assets. Theyose arrangements shall minimise the risk of loss of clients’ funds, such as cash or cash equivalents, or DLT transferrable securities or the rights related to them, or the means of access to them, due to fraud, cyber threats or negligence. DLT market infrastructures should not use clients’ assets on own account, except with prior express consent from their clients. The DLT market infrastructure should segregate clients’ funds or DLT transferable securities, or the means of access to such assets, from its own assets or other clients’ assets. The overall IT and cyber arrangements of DLT market infrastructures should ensure that clients’ assets are protected against fraud, cyber threats or other malfunctions.
Amendment 219 #
Proposal for a regulation
Recital 32
Recital 32
(32) At the time where the specific permission is granted, DLT market infrastructures should also have in place a credible exit strategy, in placecluding the transition or reversion of their DLT operations to traditional infrastructures, in case the regime on DLT market infrastructures should be discontinued or the specific permission or some of the exemptions granted should be withdrawn or the thresholds envisaged in this Regulation have been reached.
Amendment 222 #
Proposal for a regulation
Recital 33
Recital 33
(33) The specific permission granted to a DLT market infrastructure should follow the same procedures as the authorisation of a traditional MTF, or a CSD where such a CSD is seeking to operate a new securities settlement systemSSS. However, when applying for a permission, the applicant DLT market infrastructure should also indicate the exemptions it would beintends to seeking. Before granting a permission to a DLT market infrastructure, the competent authority should consult ESMA. ESMA should issue a non-binding opinion and make any recommendations on the application or the exemptions requested. ESMA should also consult the competent authorities of the other Member States. Where issuing its non-binding opinrecommendation, ESMA should aim at ensuring financial stability, market integrity and, investor protection. In order to ensure the level-playing field and fair competition across the single market, ESMA’s non-binding opinrecommendation should also aim at ensuring thesupervisory convergence, consistency and proportionality of the exemptions granted by different competent authorities across the Union.
Amendment 227 #
Proposal for a regulation
Recital 34
Recital 34
(34) The competent authority which wouldill examine the application submitted by a prospective DLT market infrastructure should have the possibility to refuse a permission if there were reasons to believe that the DLT market infrastructure would pose a threat to financial stability, investor protection or market integrity or if the application were an attempt to circumvent existing requirements.
Amendment 228 #
Proposal for a regulation
Recital 35
Recital 35
(35) The specific permission given by a competent authority to a given DLT market infrastructure should indicate the exemptions granted to that DLT market infrastructure. Such a permission should be valid for the Union and only for the period of time during which the DLT pilot regime would be operating. ESMA should publish on its website the list of DLT market infrastructures and the list of exemptions granted to each of them.
Amendment 229 #
Proposal for a regulation
Recital 36
Recital 36
(36) The specific permission and the exemptions granted by national competent authorities, following an ESMA recommendation, should be granted on a temporary basis, for a period of up to six years from the date of the specific permission. After and should be valid only for the duration of the operation of the DLT pilot regime, following the ESMA and the Commission envisaged assessments. After a three-year period and a five-year period from the date of entry into application of theis Regulation, ESMA and the Commission wshould be required to make anconduct, respectively, an early-exit assessment and a final assessment of thise DLT pilot regime for market infrastructures based on digital ledger technology. The three-year period assessment for the early-exit assessment should be calculated from the date of entry into force of this Regulation, thereby including the 12- month period needed for the preparation of the draft regulatory technical standards, as envisaged in this Regulation. The aforementioned six-year period provides DLT market infrastructures sufficient time to adapt their business models to any modifications of this regime and operate under the pilot in a commercially viable manner. It would allow ESMA and the Commission to gather a useful data set encompassing around three calendar years of the operation of the pilot regime following the grant of a critical mass of specific permissions and related exemptions and to report thereon. It would also allow time for DLT market infrastructures to take the necessary steps either to wind down their operations or to transition to a new regulatory framework which should envisage, amongst others, the procedure of adapting the permanent permissions fit for the new regulatory framework, following ESMA’s and the Commission’s reports.
Amendment 230 #
Proposal for a regulation
Recital 37
Recital 37
(37) Without prejudice to the relevant provisions of Directive 2014/65/EU (Markets in Financial Instruments Directive, MiFID II) or Regulation (EU) No 909/2014 (the Central Securities Depositories RegulationSDR), the competent authorities should have the power to withdraw the specific permission or any exemptions granted to the DLT market infrastructure, where a flaw has been discovered in the underlying technology or the services or activities provided by the DLT market infrastructure, and provided that this flaw outweighs the benefits provided by the service at stake, or where the DLT market infrastructure has breached any conditions attached to the exemptions imposed by the competent authority at the time of the granting of the specific permission, or where the DLT market infrastructure has recorded financial instruments that exceed the thresholds or do not meet the conditions of DLT transferrable securities under this Regulation. In the course of its activity, a DLT market infrastructure should have the possibility to ask for additional exemptions to those requested at the time of the initial permission. In such a case, these additional exemptions requested by the DLT market infrastructures should be subject to a specific permission byshould be requested from the competent authorities, in the same way as those requested at the time of the initial permission of the DLT market infrastructure.
Amendment 232 #
Proposal for a regulation
Recital 38
Recital 38
(38) Since DLT market infrastructures could receive temporary exemptions from existing Union legislation, they should closely cooperate with competent authorities and the European Securities and Markets Authority (ESMA) during the time of their specific permission is valid. DLT market infrastructures should inform the competent authorities and ESMA about any material change to itstheir business plan and itstheir critical staff, any evidence of cyber threats or attacks, fraud or serious malpractice, of any change in the information provided at the time of the initial application for permission, of any technical difficulties, and in particular those linked to the use of DLT, and of any new risks to investor protection, market integrity and financial stability that wasere not envisaged at the time wheren the specific permissions was granted. Where notified of such a material change, the competent authority shouldere granted. To ensure investor protection, market integrity and financial stability, where notified of such a material change, the competent authority should notify the competent authorities of the Member States in which the DLT market infrastructure operates and request ESMA to issue a recommendation, and on that basis request the DLT market infrastructure either to apply for a new permission or exemption or it shouldto take any corrective measures it deems appropriatefollowing ESMA's recommendation. DLT market infrastructures should also provide any relevant data to competent authorities and ESMA, whenever such data is requested. To ensure investor protection, market integrity and financial stabilityAfter consultation with ESMA, the competent authority which granted the specific permission to the DLT market infrastructure should be able to recommend any corrective measures, after consultation with ESMAquire the DLT market infrastructure to take a temporary corrective measure until such time as ESMA issues a recommendation.
Amendment 233 #
Proposal for a regulation
Recital 38 a (new)
Recital 38 a (new)
(38 a) ESMA should create an ad hoc consultative committee, in the form of a stakeholders’ group, which would bring together representatives of both public and private stakeholders for a limited period of time equivalent to the duration of the operation of the pilot regime. Such ad hoc consultive committee should be mandated to undertake the preparatory and consultive work needed to support ESMA when issuing the recommendations envisaged under this Regulation, by transmitting a written statement to ESMA setting out the reasons for a refusal of an exemption, or for a permission that the committee considers to be insufficiently reasoned or ill-suited in relation to the requirements of this Regulation. Additionally, such ad hoc consultive committee should examine complaints submitted directly to ESMA in cases where an applicant considers that its exemption request or permission to participate under the pilot regime has been inappropriately denied by its relevant national competent authority. However, to avoid the submission of abusive complaints to ESMA by applicants, a specific procedure should be adopted to analyse only complete and well- documented complaints transmitted to the consultative committee. That procedure should provide for a shortened delay of transmission at the request of the consultative committee after the response of the relevant NCA and for a set of documentation to be transmitted to the consultative committee which would include in particular a summary of the applicant’s activities and the requested exemption(s). The relevant documents submitted, as well as the decision of the NCA refusing the requested exemption(s) or permissions, should be translated into English.
Amendment 234 #
Proposal for a regulation
Recital 39
Recital 39
(39) DLT market infrastructures should also make regular reports to their competent authorities and ESMA. National competent authorities that have established an innovation hub or a regulatory sandbox should organise discussions among their competent departments in order to gain understanding and disseminate the knowledge they have gained. Additionally, through their participation in the European Forum for Innovation Facilitators (the EFIF), national competent authorities should be able to discuss cases with a view to exchanging knowledge and establishing best practices. ESMA should organise discussions on theose reports to enable all competent authorities across the Union to gain experience on the impact of the use of DLT in financial markets and on any adaptations to the Union financial services legislation that could be necessary to allow for the use of DLT on a greater scale.
Amendment 235 #
Proposal for a regulation
Recital 40
Recital 40
(40) Five yearBy … [36 months after the entry intodate of application of this Regulation], ESMA should report to the Commission on this pilot regime for DLT market infrastructures, including on the potential benefits linked to the use of DLT, the risks raised and the technical difficulties. Based present an early-exit assessment report to the Commission to enable the latter to decide whether to extend the pilot regime for DLT market infrastructures to... [five years after the date of application of this Regulation]. The early-exit assessment report should include potential benefits linked to the use of DLT, the risks raised and any technical difficulties encountered. The early-exit assessment report should be produced on the basis of annual interim reports, the first of which should be produced 12 months after the publication of the regulatory technical standards envisaged in this Regulation. The early-exit assessment report should provide an opportunity for evaluation and for interpretive communications that enhance legal certainty and regulatory clarity based on information collected on, among others, market size, lessons learned, and the evolution of DLT technology. In the event that the pilot regime is extended by the Commission, ESMA’s should provide the Commission with its final report, on the DLT pilot regime by ... [five years after the date of application of this Regulation]. The final report should be prepared along the same lines as the early-exit assessment report. The Commission should present a report to the Council and European Parliament. ThiEuropean Parliament and the Council based on ESMA’s early-exit assessment report and subsequently, where applicable, a report based on ESMA’s final report. The Commission’s report should in each case assess the costs and benefits of extending thise pilot regime on DLT market infrastructures for ano further period of time, extending thise regime to new types of financial instruments, making thise regime permanent with or without modifications, bringing modifications to the Union financial services legislation, or terminating this regime. e regime. Moreover, either the early-exit assessment or the final assessment should clarify how the transition from the pilot regime to a fully harmonised DLT securities regulatory regime should be managed, how risks should be mitigated, how instruments that mature following the end of the transition period should be treated, and how the separation of MTFs, which provide a number of functions that are separated at present, should be conducted following the termination of the pilot regime.
Amendment 242 #
Proposal for a regulation
Article 1 – paragraph 1
Article 1 – paragraph 1
(1) This Regulation lays down requirements on multilateral trading facilities and securities settlement systems using distributed ledger technology ‘DLT market infrastructures’, which are granted with a specific permissions to operate in accordance with Article 7 and Article 8.
Amendment 245 #
Proposal for a regulation
Article 1 – paragraph 2 – point f
Article 1 – paragraph 2 – point f
(f) cooperation between operators of DLT market infrastructures, national competent authorities and ESMA.
Amendment 248 #
Proposal for a regulation
Article 2 – paragraph 1 – point 1
Article 2 – paragraph 1 – point 1
(1) ‘distributed ledger technology’ or ‘DLT’ means a class of technologies which supportenable the distributed recording of encrypted datadata through secure mechanisms such as cryptography;
Amendment 252 #
(3) ‘DLT multilateral trading facility’ or ‘DLT MTF’ means a ‘multilateral trading facility’, operated by an investment firm or a market operator, that only admits to trading DLT transferable securities referred in Article 3 and that may be licensed or permitted, on the basis of transparent, non-discretionary, uniform rules and procedures, to:
Amendment 254 #
(4) ‘DLT securities settlement system’ means a securities settlement system, operated by a ‘central securities depository’, that settles transactions in DLT transferable securities against paymentonly admits DLT transferable securities and that is licensed or permitted, on the basis of transparent, non-discretionary, uniform rules and procedures, to: (a) ensure the initial recording of DLT transferable securities; (b) settle transactions in DLT transferable securities against payment; and (c) provide safekeeping services in relation to DLT transferable securities, or where applicable, to related payments and collateral, provided using the DLT MTF;
Amendment 258 #
Proposal for a regulation
Article 2 – paragraph 1 – point 5 a (new)
Article 2 – paragraph 1 – point 5 a (new)
(5 a) ‘DLT exchange-traded fund units’ or ‘DLT ETF units’ means units or shares of an exchange-traded fund within the meaning of Article 4(1)(46) of Directive 2014/65/EU that are issued, recorded, transferred and stored using DLT;
Amendment 260 #
Proposal for a regulation
Article 2 – paragraph 1 – point 12 a (new)
Article 2 – paragraph 1 – point 12 a (new)
(12 a) 'settlement coin’ means commercial bank money in a tokenised form;
Amendment 261 #
Proposal for a regulation
Article 2 – paragraph 1 – point 13 – introductory part
Article 2 – paragraph 1 – point 13 – introductory part
(13) ‘'sovereign bond’ means a bond issued by a sovereign issuer as defined in Article 4(1) point (60) points (i) and (ii) of Directive 2014/65/EU of the European Parliament and of the Council (the MiFID II) which is either:
Amendment 266 #
Proposal for a regulation
Article 2 – paragraph 1 – point 13 – point c
Article 2 – paragraph 1 – point 13 – point c
Amendment 267 #
Proposal for a regulation
Article 2 – paragraph 1 – point 14 – introductory part
Article 2 – paragraph 1 – point 14 – introductory part
(14) ‘other public bond’ means a bond issued by any of the following public issuerssovereign issuers, as defined in Article 4(1) point (60) points (iii), (iv), (v) and (vi) of Directive 2014/65/EU of the European Parliament and of the Council (MiFID II):
Amendment 268 #
Proposal for a regulation
Article 2 – paragraph 1 – point 14 – point e
Article 2 – paragraph 1 – point 14 – point e
Amendment 276 #
Proposal for a regulation
Article 3 – paragraph 1 – point b
Article 3 – paragraph 1 – point b
(b) convertible bonds, sovereign bonds, covered bonds, corporate bonds, other public bonds and other bonds, with an issuance size of less than EUR 500 million.
Amendment 280 #
Proposal for a regulation
Article 3 – paragraph 1 – point b a (new)
Article 3 – paragraph 1 – point b a (new)
(b a) DLT ETF units, with an issuance size of less than EUR 500 million.
Amendment 282 #
Proposal for a regulation
Article 3 – paragraph 2
Article 3 – paragraph 2
Amendment 289 #
Proposal for a regulation
Article 3 – paragraph 3
Article 3 – paragraph 3
3. The total market value of DLT transferable securities recorded in a CSD operating a DLT securities settlement systemSSS shall not exceed EUR 27.5 billion. Where a DLT MTF records the DLT transferable securities instead of a CSD, in accordance with paragraphs 2 and 3 of Article 4, the total market value of the DLT transferable securities recorded by the investment firm or market operator operating the DLT MTF shall not exceed EUR 27.5 billion.
Amendment 302 #
Proposal for a regulation
Article 4 – paragraph 1 – introductory part
Article 4 – paragraph 1 – introductory part
1. A DLT MTF and its operator shall be subject to all the requirements applicable to an MTF under Directive 2014/65/EU and Regulation (EU) No 2014/600, except if the investment firm or the market operator operating the DLT MTF:
Amendment 311 #
Proposal for a regulation
Article 4 – paragraph 2 – subparagraph 1 – point c a (new)
Article 4 – paragraph 2 – subparagraph 1 – point c a (new)
(c a) that the operations of the DLT MTF do not affect the operations and robustness of any other MTF operated by the operator of the DLT MTF, for instance, where one or more entities participate in both a regular and a DLT MTF operated by the same operator. In those circumstances, the DLT MTF operator shall clearly explain the insolvency and settlement finality risks to which its participants are exposed, as well as any measures that have been put in place in order to mitigate such risks.
Amendment 313 #
Proposal for a regulation
Article 4 – paragraph 2 – subparagraph 2
Article 4 – paragraph 2 – subparagraph 2
Where no request for an exemption has been made by the DLT MTF operator in accordance with the first subparagraph, the DLT transferable securities shall either be recorded in book-entry form in a CSD or on the distributed ledger technology of a CSD operating a DLT securities settlement systemSSS.
Amendment 322 #
Proposal for a regulation
Article 4 – paragraph 3 – point f – paragraph 1
Article 4 – paragraph 3 – point f – paragraph 1
The settlement of the payments leg may be carried out through central bank money where practicable and available, or where not practicable and available, through commercial bank money, including commercial bank money in a token-based form, or in e-money tokens.
Amendment 323 #
Proposal for a regulation
Article 4 – paragraph 3 – point f – paragraph 2
Article 4 – paragraph 3 – point f – paragraph 2
Where settlement occurs through commercial bank money or e-money tokens, the investment firm or market operator operating the DLT MTF shall identify, measure, monitor, manage, and minimise any counterparty risk arising from the use of such money. Where settlement occurs through e-money tokens for the payment leg, participants in a DLT MTF may open accounts directly with the DLT MTF for the purposes of settling the payment leg in e-money tokens, or alternatively the DLT MTF and its participants may open an account with a third party providing services relating to e-money tokens. In those cases, the DLT MTF or the third party shall be the issuer of e-money tokens and shall ensure that settlement of the payment leg takes place in e-money tokens. Since e-money tokens can only be issued either by credit institutions or e-money institutions under Regulation No 2021/XX on Markets in Crypto-Assets, the exemption provided under this Regulation with respect to the cash settlement provisions of Regulation (EU) No 909/2014 (CSDR) shall not exempt a DLT MTF, or a third party issuing e-money tokens and settling the payment leg of securities transactions through its own accounts, from the licensing requirements under the Regulation No 2021/XX on Markets in Crypto-Assets; and
Amendment 334 #
(c) complies with the conditions set out in paragraphs 2 to 7 and with any additional compensatory or corrective measures that ESMA or the competent authority which granted the specific permission may deem appropriate in order to meet the objectives pursued by the provisions from which an exemption is requested or to ensure investor protection, market integrity and/or financial stability.
Amendment 337 #
Proposal for a regulation
Article 5 – paragraph 2 – point a
Article 5 – paragraph 2 – point a
(a) demonstrates that the use of a ‘securities account’ as defined under Article 2(28) of Regulation (EU) No 909/2014 or the use of book-entry form are incompatible with the use of itsthe particular DLT deployed;
Amendment 338 #
Proposal for a regulation
Article 5 – paragraph 2 – point b
Article 5 – paragraph 2 – point b
(b) proposes compensatory or corrective measures to meet the objectives pursued by the provisions from which an exemption is requested, and ensures at minimum that:
Amendment 348 #
Proposal for a regulation
Article 5 – paragraph 5 – introductory part
Article 5 – paragraph 5 – introductory part
5. At its request, a CSD operating a DLT securities settlement systemSSS may be exempted by the competent authority from the application of Article 40 of Regulation (EU) No 909/2014 on cash settlement, provided that the CSD ensures delivery versus payment.
Amendment 350 #
Proposal for a regulation
Article 5 – paragraph 5 – subparagraph 1
Article 5 – paragraph 5 – subparagraph 1
The settlement of the payments leg may be carried out through central bank money, where practicable and available, or where not practicable and available, through commercial bank money, including commercial bank money in a token-based form, or in e-money tokens.
Amendment 352 #
Proposal for a regulation
Article 5 – paragraph 5 – subparagraph 2
Article 5 – paragraph 5 – subparagraph 2
Where settlement occurs through commercial bank money or e-money tokens, the investment firm or market operator operating the DLT MTFSSS shall identify, measure, monitor, manage, and minimise any counterparty risk arising from the use of such money. Where settlement occurs through e-money tokens for the payment leg, participants in a DLT SSS may open accounts directly with the DLT SSS for the purposes of settling the cash leg in e-money tokens, or alternatively the DLT SSS and its participants may open an account with a third party providing services relating to e-money tokens. In those cases, the DLT SSS or the third party shall be the issuer of e-money tokens and shall ensure that settlement of the payment leg takes place in e-money tokens. Since e-monkey tokens can only be issued either by credit institutions or e-money institutions under the Regulation No 2021/XX on Markets in Crypto-Assets, the exemption provided under this Regulation with respect to the cash settlement provisions of the CSDR is not intended to exempt the DLT SSS, or a third party issuing e-money tokens and settling the payment leg of securities transactions through its own accounts, from the licensing requirements under the Regulation No 2021/XX on Markets in Crypto-Assets.
Amendment 358 #
Proposal for a regulation
Article 5 – paragraph 6
Article 5 – paragraph 6
6. At its request, a CSD operating a DLT securities settlement systemSSS may be exempted by the competent authority from the application of Articles 50 and/or Article 53 on standard link access and access between a CSD and another market infrastructure of Regulation (EU) No 909/2014, provided that it demonstrates that the use of a DLT is incompatible with legacy systems of other CSDs or other market infrastructures or that granting such access to another CSD or another market infrastructure using legacy systems would trigger disproportionate costs, given the size of the DLT securities settlement system.
Amendment 359 #
Proposal for a regulation
Article 5 – paragraph 7 – introductory part
Article 5 – paragraph 7 – introductory part
7. Where a CSD operating a DLT securities settlement systemSSS has requested an exemption in accordance with the first sub-paragraph, it shall give access to other CSDs operating a DLT securities settlement systemSSS or to DLT MTFs.
Amendment 362 #
Proposal for a regulation
Article 5 – paragraph 7 – subparagraph 1 – introductory part
Article 5 – paragraph 7 – subparagraph 1 – introductory part
Where a CSD operating a DLT securities settlement systemSSS requests an exemption in accordance with paragraphs 2 to 6, it shall in any case demonstrate that:
Amendment 364 #
Proposal for a regulation
Article 5 – paragraph 7 – subparagraph 1 – point a
Article 5 – paragraph 7 – subparagraph 1 – point a
(a) the exemption requested is proportionate to and justified by the use of itsa DLT, and;
Amendment 366 #
Proposal for a regulation
Article 5 – paragraph 7 – subparagraph 1 – point b
Article 5 – paragraph 7 – subparagraph 1 – point b
(b) the exemption requested is limited to the DLT securities settlement systemSSS and does not extend to any other securities settlement system as defined in Article 2(10) of Regulation (EU) No 909/2014 operated by the same CSD.
Amendment 367 #
Proposal for a regulation
Article 5 – paragraph 8
Article 5 – paragraph 8
8. Where a CSD has requested and been granted an exemption under paragraph 3, the requirement in Article 39(1) of Regulation (EU) No 909/2014/EU for Member States to designate and notify the securities settlement systemSSS operated by the CSD in accordance with Directive 98/26/EC shall not apply to the DLT securities settlement systemSSS. The foregoing shall not preclude Member States from designating and notifying a DLT securities settlement systemSSS in accordance with Directive 98/26/EC where the DLT securities settlement systemSSS fulfils all of the requirements of that Directive.
Amendment 370 #
Proposal for a regulation
Article 5 – paragraph 8 a (new)
Article 5 – paragraph 8 a (new)
8 a. At its request, and in accordance with Article 7, a CSD operating a DLT SSS may also operate a DLT MTF.
Amendment 375 #
Proposal for a regulation
Article 6 – paragraph 1 – subparagraph 1
Article 6 – paragraph 1 – subparagraph 1
They shall also have up-to-date, clear and detailed publically available written documentation, which may be made available by electronic means, defining the rules under which the DLT market infrastructure shall operate, including the agreed upon associated legal terms defining the rights, obligations, responsibilities and liabilities of the operator of the DLT market infrastructure, as well as that of the members, participants, issuers and/or clients using the DLT market infrastructure concerned. Such legal arrangements shall specify the governing law, the pre-litigation dispute settlement mechanism and the jurisdiction for bringing legal action.
Amendment 381 #
Proposal for a regulation
Article 6 – paragraph 2
Article 6 – paragraph 2
2. A CSD operating a DLT securities settlement systemSSS, and an investment firm or a market operator operating a DLT MTF requesting an exemption from Article 3(2) of Regulation (EU) No 909/2014, shall establish or document, as appropriate, rules on the functioning of the DLT they operatuse, including the rules for accessing the distributed ledger technology, the participation of the validating nodes, addressing potential conflicts of interest, and risk management including any mitigation measures.
Amendment 386 #
Proposal for a regulation
Article 6 – paragraph 3
Article 6 – paragraph 3
3. The operators of DLT market infrastructures shall provide their members, participants, issuers and clients with clear and unambiguous information on their website on how they carry out their functions, services and activities and how this performance of functions, services and activities deviates from an MTF or a securities settlement system. This information shall inclun SSS. This information shall include the type of DLT used. Furthermore, as natural persons may directly participate in DLT market infrastructures, if the payment leg of DLT transferable securities transactions were to occur on the books of a person who is not a licensed credit institution, this would have the consequence that the cash accounts held by natural persons, as well by legal persons such as micro, small and medium-sized enterprises, with DLT market infrastructures would not benefit from the deposit guarantee scheme protection under Directive 2014/49/EU of the European Parliament and of the Council (the Deposit Guarantee Schemes Directive, DGSD) and of the depositor preference under Directive 2014/59/EU of the European Parliament and of the Council (the ‘BRRD’). The DGSD and the depositor preference under the type of DLT usedBRRD only apply to deposits in the form of a credit balance which results from funds left in an account or from temporary situations deriving from normal banking transactions and which a credit institution is required to repay. In this context, DLT market infrastructures should explicitly disclose to their participants that they are not protected under the relevant DGSD and BRRD provisions.
Amendment 387 #
Proposal for a regulation
Article 6 – paragraph 4 – subparagraph 1
Article 6 – paragraph 4 – subparagraph 1
The operators of DLT market infrastructures shall have a specific operational risk management procedure for the risks posed by the use of a DLT and crypto- assets and on how these risks would be addressed if they materialised.
Amendment 390 #
Proposal for a regulation
Article 6 – paragraph 6
Article 6 – paragraph 6
6. The operator of a DLT market infrastructure shall establish a clear, detailed and publically available strategy for transitioning out of or winding down a particular DLT market infrastructure (referred to herein as the ‘transition strategy’), including the transition or reversion of their DLT operations to traditional infrastructures, ready to be deployed in a timely manner, in the event that the permission or some of the exemptions granted in accordance with Article 4 or Article 5 have to be withdrawn or otherwise discontinued, or the thresholds envisaged in this Regulation have been reached or in the event of any voluntary or involuntary cessation of the business of the DLT MTF or DLT securities settlement systemSSS. The transition strategy shall set out how members, participants, issuers and clients shall be treated, in the event of such withdrawal, discontinuation or cessation. The transition strategy shall be updated on an ongoing basis subject to the prior consent of the competent authority which granted the permission to operate and related exemptions under Article 4 and Article 5.
Amendment 396 #
Proposal for a regulation
Article 7 – paragraph 2 – point c
Article 7 – paragraph 2 – point c
(c) where applicable, the functioning of its proprietary DLTthe DLT used as referred to in Article 6(2);
Amendment 400 #
Proposal for a regulation
Article 7 – paragraph 2 – point g
Article 7 – paragraph 2 – point g
(g) the exemptions it is requesting in accordance with Article 4, the justification for each exemption sought, any compensatory or corrective measures proposed as well as the means envisaged to comply with the conditions attached to such exemptions under Article 4.
Amendment 404 #
Proposal for a regulation
Article 7 – paragraph 3 – introductory part
Article 7 – paragraph 3 – introductory part
3. Before deciding on an application for a specific permission to operate a DLT MTF under this Regulation, the competent authority of the home Member State shall notify and provide all relevant information on the DLT MTF to ESMA, an explanation of the exemptions requested, their justifications and any compensatory or corrective measures proposed by the applicant or required by the competent authority.
Amendment 407 #
Within three months of receipt of the notification, ESMA shall provide the competent authority with a non-binding opinionrecommendation issued in accordance with Article 16 of Regulation (EU) No 1095/2010 on the application and shall make any recommendations on the exemptions requested by the applicant, that are necessary to ensure investor protection, market integrity and financial stability. ESMA shall also promote the consistency and proportionality of exemptions granted by competent authorities to investment firms or market operators operating DLT MTFs across the Union. In order to do so, ESMA, shall consult the competent authorities of the other Member States in a timely manner and take the utmost account of their views in its opinrecommendation.
Amendment 413 #
Proposal for a regulation
Article 7 – paragraph 5 – subparagraph 1
Article 7 – paragraph 5 – subparagraph 1
ESMA shall publish on its website (a) the list of DLT MTFs, the start and end dates of their specific permissions and the list of exemptions granted to each of them, and (b) the total number of requests for exemptions that have been made under this Regulation, indicating the number of exemptions accepted or refused together with the respective justifications, on an anonymous basis.
Amendment 422 #
Proposal for a regulation
Article 7 – paragraph 7 – introductory part
Article 7 – paragraph 7 – introductory part
7. Where in the course of its activity, an investment firm or a market operator operating a DLT MTF proposes to introduces a material change to the functioning of the DLT, or to its services or activities, which requires a new permission, a new exemption, or the modification of one or more of its existing exemptions or of any conditions attached to it, it shall request such permission, exemption or modification in accordance with Article 4. Such permission, exemption or modification shall be processed by the competent authority, in accordance with paragraphs 2 to 5.
Amendment 427 #
Proposal for a regulation
Article 8 – paragraph 2 – point c
Article 8 – paragraph 2 – point c
(c) the functioning of its proprietary DLT as referred to in Article 6(2);
Amendment 429 #
Proposal for a regulation
Article 8 – paragraph 2 – point g
Article 8 – paragraph 2 – point g
(g) the exemptions it is requesting, in accordance with Article 5, the justifications for each exemption sought, any compensatory or corrective measures proposed as well as the measures envisaged to comply with the conditions attached to such exemptions under Article 5.
Amendment 435 #
Proposal for a regulation
Article 8 – paragraph 3 – introductory part
Article 8 – paragraph 3 – introductory part
3. Before deciding on an application for a specific permission to operate a DLT MTFSSS under this Regulation, the competent authority shall notify and provide all relevant information on the DLT securities settlement systemSSS to ESMA and an explanation of the exemptions requested, their justification and any compensatory or corrective measures proposed by the applicant or required by the competent authority.
Amendment 440 #
Proposal for a regulation
Article 8 – paragraph 5 – subparagraph 1
Article 8 – paragraph 5 – subparagraph 1
ESMA shall publish on its website (a) the list of DLT securities settlement systemSSSs, the start and end dates of their specific permissions and the list of exemptions granted to each of them, and (b) the total number of requests for exemptions that have been made under this Regulation, indicating the number of exemptions accepted or refused together with the respective justifications, on an anonymous basis.
Amendment 461 #
Proposal for a regulation
Article 9 – paragraph 4 – point b
Article 9 – paragraph 4 – point b
(b) the number and value of DLT transferable securities admitted to trading on the DLT MTF, the number and value of DLT transferable securities recorded by a CSD operating DLT securities settlement systemSSSs, and where applicable, the number and value of transferable securities recorded by an investment firm or market operator operating on a DLT MTF;
Amendment 463 #
Proposal for a regulation
Article 9 – paragraph 4 – point c
Article 9 – paragraph 4 – point c
(c) the number and value of transactions traded on a DLT MTF and settled either by a CSD operating a DLT securities settlement systemSSS, or where applicable, by an investment firm or market operator operating a DLT MTF;
Amendment 465 #
Proposal for a regulation
Article 9 – paragraph 5 – introductory part
Article 9 – paragraph 5 – introductory part
5. ESMA shall fulfil a coordination role between competent authorities, with a view to building a common understanding of distributed ledger technology and DLT market infrastructure as well as a common supervisory culture and convergent supervisory practices, ensuring consistent approaches and convergence in supervisory outcomes. ESMA shall create an ad hoc consultative committee in the form of a stakeholders’ group, bringing together representatives of both public and private stakeholders for a limited period of time equivalent to the duration of the operation of the pilot regime. The ad hoc consultative committee shall undertake the preparatory and consultative work needed to support ESMA in the issuance of the recommendations envisaged under this Regulation, by transmitting a written statement to ESMA setting out the reasons for a refusal of an exemption, or for a permission that the committee considers to be insufficiently reasoned or ill-suited to the requirements of this Regulation. The ad hoc consultative committee shall examine complaints submitted directly to ESMA in cases where an applicant considers that its exemption request or permission to participate under the pilot regime has been inappropriately denied by its relevant national competent authority. In order to avoid the submission of abusive complaints to ESMA by applicants, only complete and well-documented complaints transmitted to the consultative committee shall be analysed. The ad hoc consultative committee may request a shortened delay of transmission after the response of the relevant NCA and may also request that a set of documentation be transmitted to the consultative committee, including in particular a summary of the applicant’s activities and the requested exemption(s). The relevant documents submitted, as well as the decision of the NCA refusing the requested exemption(s) and or permission, shall be translated into English.
Amendment 467 #
Proposal for a regulation
Article 10 – paragraph 1 – introductory part
Article 10 – paragraph 1 – introductory part
1. Five years from the entry into application of this Regulation, at the latest, ESMA shall present a report to the CommissESMA shall present to the Commission an early-exit assessment report by ... [The three-year period assessment for the early-exit assessment should be calculated from the date of the entry into force of this Regulation, hence including the 12 months period needed for the draft regulatory technical standards, as envisaged in this Regulation] and, if the regime prescribed in this Regulation is not terminated by then, a final report by [five years from the entry into application of this Regulation] on:
Amendment 472 #
Proposal for a regulation
Article 10 – paragraph 1 – point b
Article 10 – paragraph 1 – point b
(b) the number of DLT MTFs and CSDs operating a DLT securities settlement systemSSS which have been granted a specific permission under this Regulation;
Amendment 474 #
Proposal for a regulation
Article 10 – paragraph 1 – point d
Article 10 – paragraph 1 – point d
(d) the number and value of DLT transferable securities admitted to trading on DLT MTFs, the number and value of DLT transferable securities recorded by CSDs operating DLT securities settlement systemSSSs, and where applicable, the number and value of transferable securities recorded by DLT MTFs;
Amendment 476 #
Proposal for a regulation
Article 10 – paragraph 1 – point e
Article 10 – paragraph 1 – point e
(e) the number and value of transactions traded on DLT MTFs and settled by CSDs operating DLT securities settlement systemSSS, and where applicable, by DLT MTFs;
Amendment 482 #
Proposal for a regulation
Article 10 – paragraph 1 – point j
Article 10 – paragraph 1 – point j
(j) the benefits and costs resulting from the use of a DLT, in terms of any efficiency improvements and risk reducmitigations across the entire trading and post-trading chain, including without limitation, with regard to the recording and safekeeping of DLT transferable securities, the traceability of transactions, corporate actions, reporting and supervision functions at the level of the DLT market infrastructure;
Amendment 486 #
Proposal for a regulation
Article 10 – paragraph 2 – introductory part
Article 10 – paragraph 2 – introductory part
2. Based on the reports referred to in paragraph 1, the Commission shall present a report to the European Parliament and Council within three months of receipt of each report, including a cost-benefit analysis on whether the regime for DLT market infrastructures under this Regulation should be:
Amendment 488 #
Proposal for a regulation
Article 10 – paragraph 2 – point a
Article 10 – paragraph 2 – point a
(a) extended for another period; of two years, in the case of the early-exit assessment report referred to in Article 10, paragraph 1;