Response to discussion on the potential review of the investment firms’ prudential framework
Q1: What would be the operational constraints of potentially removing the threshold?
As regards Q1, Spanish ESIs report to their regulator on a monthly basis the volume of assets at individual and consolidated level, and this without the need for this volume to be greater than 5 billion, so that the competent naonal authority (in our case, CNMV) has all the informaon to be able to transmit it to the EBA. In this regard, we consider that the deleon of the reference to the €5 billion threshold from the text of the IFR for companies that are part of a group, in order to allow the noficaon of all relevant investment firms, does not imply any operaonal limitaon, especially as the objecve pursued (namely that the EBA communicates to the instuons and competent authories, including the authories competent for authorisaon as a credit instuon) can connue to be fulfilled.
Q2: Would you suggest any further element to be considered regarding the thresholds used for the categorisation of Class 3 investment firms?
From the ESIs of the CIMD Group, we consider that the current condions can be maintained but we consider it necessary to raise these levels, at least, when referring to the consolidaon perimeter of several ESIs belonging to the same group. In addion, in line with paragraph 39 of the CfA, the scope of consolidaon should not include ESIs located outside the EU but should include the subsidiaries and/or branches of ESIs located in the EU, irrespecve of where these subsidiaries and/or branches are located.
On the other hand, in order to provide investment services efficiently and to be able to cover clients' requests, especially for financial instruments that are not very liquid and with a very limited credit risk (e.g. corporate bonds), the ESIs need to submit bid/offer prices without having the guarantee of finding them immediately available on other financial market parcipants (regulated markets, MTFs, OTFs, systemac internalisers or bilaterally with other counterpares), MTFs, OTFs, systemac internalisers or bilaterally with another counterparty) so that in order to carry out the transacon it has to make use of the "execuon on own account" facility (facility set out in point 3 of Secon A of Annex I of MiFID II) becoming part of Class 2 under the IFR but its balance sheet posion is zero.
At this point it should be noted that the IFR, like the CRR, in dealing with this investment service is trying to control the risks associated with own porolio posions, either for investment or trading, recorded on the balance sheet.
Thus, ESIs in this situaon fall into Class 2 when the risk to the system, ceteris paribus the other requirements, is the same as those in Class 3. In order to avoid this discriminaon, we propose that in order to be Class 3, the service of "execuon on own account" should be allowed subject to compliance with restricons/limitaons to the posions reflected in the balance sheet or that the concept of this service should be redefined.
Consequently, we consider it necessary to take two acons: one, to specify the acvity of "dealing on own account" by excluding from it execuon by an ESI in its own name on behalf of clients and intermediaon arculated through the interposion of the own account without market risk (matched principal); and, two, to raise the thresholds set out in Arcle 12 of the IFR to delimit which ESIs are considered small and non-interconnected.
Q3: Do you have any views on the possible ways forward discussed above regarding the transition of investment firms between Class 2 and Class 3 should be introduced?
Establishing a "freeze" period as proposed (that the ESI would be obliged to be classified as Class 2 for a period of at least one year aer its reclassificaon) could force a Class 3 ESI that is close to the limits to comply with requirements that are not proporonate to its actual acvity and does not prevent the ESI from changing category several mes in the same year. For example, let us assume a Class 3 ESI that in March AAAA ceases to meet the criteria of Arcle 12.1 of the IFR, but in July AAAA again meets the criteria of that arcle, becoming a Class 2 ESI unl March AAAA+1, at which point it would be classified as a Class 3 ESI and in June AAAA+1 it again ceases to meet the condions of Arcle 12.1 of the IFR, becoming Class 2 again.
On the other hand, it does not follow from the IFR that a change from Class 3 to Class 2 requires prior noce to and authorisaon by the competent authority since according to Arcle 12.3 of the IFR the change from Class 3 to Class 2 is with immediate effect as soon as the criteria of Arcle 12.1 are no longer met.
Liming the number of changes from Class 3 to Class 2 may be counterproducve from a control point of view; and maintaining the classificaon as Class 2 for at least one year may be disproporonate. The standard already provides for a transion period (6 months) from Class 2 to Class 3 and the Competent Authority has been informed. Therefore, we consider that the competent authority should be given the power to authorise the change from Class 2 to Class 3, maintaining the current criteria for moving from Class 3 to Class 2.
Q4: Should the minimum level of the own funds requirements be different depending on the activities performed by investment firms or on firms’ business model? If yes, which elements should be considered in setting such minimum?
Three (3) months seems a sufficient period of me to stop providing the various services for which the ESI is authorised. However, it is very likely that the liquidaon of the ESI will extend well beyond those three months; nevertheless, the costs incurred by the ESI aer the cessaon of acvity will generally be very low. We therefore consider that maintaining own resources at the level indicated is sufficient unless the winding-up is unexpected and the ESI has not been able to adjust its cost structure to the evoluon of its business.
In conclusion, from the ESIs of the CIMD Group, we consider that the level should be maintained, but it could be considered to increase it in the case of providing the auxiliary service of custody and administraon of financial instruments since, not being an exclusive service of ESIs, the cessaon of this service will probably be prolonged beyond three months.
Q5: Is it necessary to differentiate the deductibles by activity or by business model for the purpose of calculating the FOR? If yes, which items should then be considered and for what reasons?
From the ESIs of the CIMD Group, we understand that the deductible items contemplated in article 13.4 of the IFR together with those included in Delegated Regulation (EU) 2022/1455, of the Commission of 11 April 2022, are sufficient and not all apply in all cases, in such a way that they allow the computed items to be a very approximate reflecon of the acvity carried out by each ESI.
Consequently, it is our understanding that it is not necessary to differenate acvity-based deducons.
Q6: Are expenses related to tied agents material for the calculation of the FOR to the extent to require a dedicated treatment for their calculation? If yes, are the considerations provided above sufficient to cover all the relevant aspects?
Given that the basis of calculation for this criterion is the expenses incurred by the ESI in the previous financial year, i.e. in a situation of normality in the exercise of its activity and that the objective of this criterion is to cover the expenses that the ESI may incur during the liquidation period (in principle, three months) and, therefore, its activity ceases, it does not seem to make much sense to include the expenses incurred associated with the agent, especially when an important part of the agent's remuneration is associated with the success in the performance of its duties.
Consequently, the CIMD Group of ESIs considers that only costs incurred by the ESI that are not associated with the success of the agent in the performance of his duties should be taken into account.
Q7: Should the FOR be calculated distinguishing the costs related to non-MiFID activities, which criteria should be considered? What kind of advantages or disadvantages would this have in practice?
Without losing sight of the objective of establishing minimum own resources by this methodology (see question 6), the orderly winding-up of the ESI is so far not being considered to be carried out only in respect of MiFID activities, but should be intended to be complete and therefore also cover the cessation of non-MiFID activities (ancillary activities).
The non-inclusion of the costs associated with ancillary activities in the computation of the FOR may mean that the ESI in liquidation has to cover fixed costs not considered to be associated with these activities, which would generate a deficit of own resources to cover the costs associated with its main activities (services and investment activities), preventing the liquidation from being orderly; In this way, we echo the arguments set out in the CfA, but we understand that it should be clarified that under no circumstances can the majority of the costs be associated with ancillary activities, since for them to have such status, at least in the Spanish case, these activities cannot acquire a degree of importance in the overall activity of the institution that could distort their corporate purpose (Article 11.4 of Royal Decree 813/2023 of 8 November on the legal regime for investment firms and other entities providing investment services).
The only advantage we see in this procedure is that, to the extent that these costs do not count as fixed overheads, there will be a reduction in the capital requirement and a consequent improvement in the solvency ratio.
In conclusion, we understand that it is necessary to include in the computation of fixed overheads (FOR) the expenses associated with the exercise of ancillary activities, but maintaining for these activities the same deductible concepts that apply to the expenses associated with MiFID activities.
Q8: Should expenses related to fluctuation of exchange rates be included in the list of deductions for the calculation of the FOR? If yes, which criteria should be considered in addition to the ones suggested above?
The custody of money in non-euro currencies is recorded in accounts denominated in each of these currencies, but when accounting for these positions, the equivalent value in euro has to be calculated; thus, if the currency loses value against the euro, an expense (loss) is recorded by the ESI in its balance sheet, but this expense/loss is not associated with the performance of its activity and will not actually be borne by the ESI either in the event of liquidation or in a situation of normal performance of its activities. Consequently, the negative exchange differences associated with customers' positions should be considered as a non-eligible expense, irrespective of whether the recording is individualised or not.
Q9: Should the concept of ‘ongoing advice’ be further specified for the purpose of calculating the K-AUM? If yes, which elements should be taken into account in distinguishing a recurring provision of investment advice from a one-off or non-recurring one?
From the ESIs integrated in the CIMD Group we have no opinion.
Q10: Does the K-DTF provide a proper level of capital requirements for the provision of the services Trading on own account and execution of order on behalf of clients on account of the investment firm? If not, what elements of the calculation of the K-DTF present most challenges?
From the ESIs integrated in the CIMD Group we have no opinion.
Q11: Would you have any examples where the calculation of the K-DTF based on comparable activities or portfolios results in very different or counterintuitive outcomes? If yes, how could the calculation of the K-DTF be improved?
From the ESIs integrated in the CIMD Group we have no opinion.
Q12: What are the elements of the current methodology for the calculation of the K-ASA that raise most concerns? Taking into account the need to avoid complexifying excessively the methodology, how could the calculation of the K-ASA be improved to assess those elements?
From the ESIs integrated in the CIMD Group we have no opinion.
Q13: Clients’ asset protection may be implemented differently in different Member States. Should this aspect be considered in the calculation of the K-ASA? If so, how should that be taken into account in the calculation?
The ESI members of the CIMD Group have no opinion.
Q14: Should crypto-assets be included into K-factor calculation, either as a new K-factor or as part of K-NPR?
The CfA proposes that cryptoassets included in the investment portfolio should be included in the calculation of the K-NPR. This undoubtedly poses a double discrimination with regard to the treatment of the positions in the different assets held in the investment portfolio, which, in turn, cannot be justified by the high volatility of the asset. On the one hand, a position in the investment portfolio is being included in the calculation of the K-NPR when, at present, this factor only takes into account positions in the trading book; on the other hand, an attempt is being made to increase the own funds burden simply because of the volatility of the security.
Avoiding this double discrimination requires, on the one hand, acting in the sense of including all the positions of the ESI's own investment portfolio (see exposure between Q11 and Q12) and, on the other hand, establishing risk weighting criteria according to volatility, liquidity, issuer credit rating, etc.
Moreover, and in line with what was stated above in reference to section 4.8 of Section 4 of the CfA, the criteria for a position to be considered in the banking book or in the trading book should be specified, since otherwise, if positions in the banking book do not count and there is nothing to prevent an ESI from unwinding a position in the banking book before the estimated deadline, some institutions will record positions in the banking book so that they do not count in the K-NPR, making the distinction between the banking book and the trading book non-existent.
In conclusion, it may make sense to include the crypto-asset position in the K-NPR calculation, but limited to the trading book, for which it is necessary to set clear and plausible criteria that prevent recording in the banking book positions that would otherwise have been recorded in the trading book. In any case, their inclusion should not be justified by volatility.
Q15: In the context of addressing operational risk for investment firm trading on own account, is there any further element to be considered to ensure that the requirements are proportionate to their trading activities?
From the ESIs of the CIMD Group, we understand that the operational risk incurred by ESIs when trading either on their own account or on behalf of their clients is no different from the risk they incur when carrying out RTOs for their clients; therefore, any other factor or higher weighting on the current factors that is applied to the calculation of the K-DTF will not be justified from an operational point of view.
Q16: The discussion paper envisages the possibility to rely on alternative methodologies with respect to the K-DTF. If the respondents suggest an alternative approach, how would this refer to the two activities addressed under the K-DTF (trading on own account and execution on own account on behalf of the clients)?
As noted in the answer to question 15, for ESIs there is no greater operational risk when trading on own account or in own name on behalf of their clients than when RTOs are carried out in the name and on behalf of their clients. However, it is true that this type of operations entails an additional risk not contemplated in the K-COH associated not with the operation but with the risk of settlement of the contracted transactions in the event of late settlement by the counterparty or, in the worst case scenario, failure to settle.
One way to include this risk without altering the principle of consistency with respect to the K-COH is to take into account this late settlement risk for transactions included in the K-DTF in a manner similar to the treatment given to them in Title V of Part Three of the CRR.
Q17: When addressing other activities an investment firm may perform, which elements, on top of the discussed ones, should be also taken in consideration?
From the ESIs of the CIMD Group, we are aware that any activity carried out by an ESI must be taken into account, especially when calculating the own funds by the FOR methodology (see Q7); however, before including in the calculation of own funds by K-factors activities so far not considered (management of an MTF/SOC or investment services on crypto-assets) it should be considered whether this would not amount to discriminatory treatment with respect to other organisations/intervener that may provide such services without having own funds requirements for that purpose. For example, a governing body that is not an ESI and operates an MTF or an OTF is not subject to additional own resources; the same applies to existing crypto-asset service providers that are not required to be ESIs.
On the other hand, the inclusion of these activities in the K factors would lead us to consider whether a K factor associated with ancillary services (regulated in art. 126 of the LMVSI) and another for ancillary activities should not also be included, whether they are services and activities provided for in articles 125 and 126, referring to instruments not covered in article 2 of the LMVSI, or those that involve the extension of their business (both regulated in art. 127 of the LMVSI). In this case, as none of these activities are exclusive to the ESIs, we come to the reflection indicated above as to whether this would not represent discriminatory treatment with respect to other companies that can carry out such activities without any specific requirements.
Q18: Investment firms performing MiFID activities 3 and 6 (trading on own account and underwriting on a firm commitment basis) are more exposed to unexpected liquidity needs because of market volatility. What would be the best way to measure and include liquidity needs arising from these activities as a liquidity requirement?
At the ESIs of the CIMD group, we understand that liquidity requirements must be aimed at covering unexpected situaons or reimbursement requests from clients. In this sense, considering that the cash deposited by customers is in accounts opened in banks and that the ESI cannot use the money in these accounts to cover its own operaons, we understand that any request from a customer can be covered without the need to resort to liquid instruments owned/owned by the ESI.
With regard to the acvies of the ESIs authorised to carry out acvies (3) and (6) of Annex A of MiFID II, it should be noted that the transacons to be covered by the ESIs in the performance of both acvies entail having the necessary liquidity, which requires having it foreseen and could not be covered with the liquidity required under the IFR because it could mean failing to comply with the requirements established in arcle 43 of the same.
Therefore, we consider that it is not necessary to measure and include addional requirements to those set out in the IFR for the mere performance of acvies (3) and (6) of Annex A of MiFID II.
Q19: Investment firms performing the activities of providing loans and credit to clients as an ancillary service in a non-negligeable scale would be more exposed to liquidity risks. What would be the best way to measure such risk in order to take them into account for the purposes of the liquidity requirements?
From the ESIs of the CIMD Group, we understand that for the performance of this auxiliary service the ESI must have money and/or securies in proporon to the volume of this acvity; given that securies lending cannot be open on any securies but must be limited to a specific set of securies, we understand that one criterion to ensure that the ESI has a sufficient volume of securies is to set a limit in the contract or establish a volume in each security based on the moving average of the loans granted during a period N. With regard to cash, the limits and condions should be set out in the contract and require sufficient liquidity to cover a substanal part of these limits; however, it may be appropriate, in addion, to require ESIs carrying out this acvity to have a volume of "ultra" liquid assets based on the moving average of loans granted during a period N increased by a percentage as a guarantee against unforeseen requests.
In any case, we consider that the liquidity required by this acvity has to be an increase over the regulatory liquidity set out in Arcle 43 of the IFR.
Q20: Investment firms, providing any of the MiFID services, but exposed to substantial exchange foreign exchange risk may be exposed to liquidity risks. What would be the best way to measure such risk in order to take them into account for the purposes of the liquidity requirements?
The ESIs of the CIMD Group consider that it could be sufficient to establish a percentage on the average variation of the exchange rate, requiring a minimum liquidity equal to the result of applying these percentages to the value of the position in each currency.
The liquidity required by this activity has to be an increase over the regulatory liquidity set out in Article 43 of the IFR.
Q21: Are there scenarios where the dependency on service providers, especially in third countries, if disrupted, may lead to unexpected liquidity needs? What type of services such providers perform?
From the ESIs integrated in the CIMD Group we have no opinion.
Q22: Are there scenarios where the dependency on liquidity providers, especially in third countries, would lead to unexpected liquidity needs? Could you provide some examples?
From the ESIs integrated in the CIMD Group we have no opinion.
Q23: What other elements should be considered in removing the possibility of the exemption in Article 43 of the IFR?
From the ESIs integrated in the CIMD Group we have no opinion.
Q24: Do you have any views on the possible ways forward discussed above concerning the provision of MiFID ancillary services by UCITS management companies and AIFMs?
From the ESIs of the CIMD Group, we understand that the proposal made by EBA/ESMA in the CfA is correct, but before addressing it, the proportionality of such actions should be taken into consideration, taking into account the final objective and on whom the work to be done would fall.
In order to analyse such proportionality, we believe that the following should be taken into consideration:
• It should not be overlooked that the FOR criterion for fund managements already takes into account the costs incurred by fund managements in providing these services (see jusficaon given in the answer to Q7) as it considers fixed overhead costs and not only the costs associated with the main object of their acvity (management of UCITS and/or private equity enes).
• Calculang the impact of applying IFD/IFR requirements would imply for these enes to develop calculaon and recording tools whose cost may not be jusfied by the result obtained.
Q25: Are differences in the regulatory regimes between MICAR and IFR/IFD a concern to market participants regarding a level playing field between CASPs and Investment firms providing crypto-asset related services? In particular, are there concerns on the capital and liquidity requirement regimes?
As we have pointed out in the answer to Q17 above, the ESIs of the CIMD Group believe that including in the calculation of own funds by K-factors activities not considered so far may involve discriminatory treatment with respect to CASPs, since the latter are required to have a lower level of capital than that required of ESIs and, in no case, are subject to additional resources due to criteria such as K-factors; Therefore, in the best case scenario, ESIs would have similar requirements to CASPs if the level of capital requirements is set by the FOR criterion.
As regards liquidity requirements, we reiterate what was stated in the response to Q18.
Q26: Sections 5.2, 5.4 as well as this Section 9.1 all touch upon how crypto-assets (exposures and services) may influence the IFD and the IFR. Is there any other related element that should be considered in the review of the investment firms’ prudential framework?
From the ESIs integrated in the CIMD Group we have no opinion.
Q27: Is the different scope of application of remuneration requirements a concern for firms regarding the level playing field between different investment firms (class 1 minus and class 2), UCITS management companies and AIFMs, e.g., in terms of the application of the remuneration provisions, the ability to recruit and retain talent or with regard to the costs for the application of the requirements?
The CIMD Group considers that the amendments introduced in the IFD with respect to the CRD in the area of remuneraon have provided greater flexibility to Class 2 ESIs and have allowed, to a large extent, remuneraon to be more proporonate to the business models of these ESIs. Moreover, understanding the differences between the criteria applicable to Class 1 minus and Class 2, given that the thresholds set for Class 1 minus are sufficiently high for there to be very few ESIs in this category (see Table 1 in the Annex "MiFID investment firms in the EU" of the CfA itself), we do not believe that the impact should be a cause for concern.
However, we do have concerns about having to apply the remuneraon provisions for ESIs contained in the IFD to enes that have their own disnct regulaon (i.e. UCITS managements and AIFM) or to other enes whose business model has nothing to do with an ESI and which do not have specific remuneraon regulaon. As stated in secon 8 above, the CIMD Group believes that applying the provisions of the DFI on remuneraon to group companies that do not apply DFIs to them or, in the case of management companies, have other specific provisions, has two clear negave impacts:
− compeve disadvantages; and
− difficulty in adapng the IFD criteria to companies whose sector is governed by completely different business models to those of the ESIs.
In any case, we must point out that, even focusing on the provisions applicable to Class 2 ESIs, some of the requirements and principles contained in the DFI are not consistent to simultaneously allow the objecve of maintaining a solid capital base that allows the connuity of the ESI and the retenon of talent. In addion, we are at a disadvantage compared to neighbouring countries that are the main competors for the development of securies markets in the EU.
EU as they have fewer restricons, especially when it comes to seng variable remuneraon, which is one of the main causes of brain drain. It also seems disproporonate for most Class 2 ESIs to have to pay part of the variable remuneraon in equity instruments (Arcle 32.1.j of the IFD).
Finally, we believe that it should be clearly defined whether, apart from the restricons on variable remuneraon, the remuneraon policies that the ESIs and their consolidable groups are obliged to have apply only to staff that have an impact on their risk profile, the remuneraon policies that ESIs and their consolidable groups are required to have apply only to staff that have an impact on the risk profile of the ESI (defined groups in accordance with Delegated Regulaon (EU) 2021/2154) or to all staff as inferred from Arcle 26 of the DFI, which is consistent with the EBA's interpretaon in its guidelines on appropriate remuneraon policies under Direcve (EU) 2019/2033 (EBA/GL/2021/13).
Q28: Are the different provisions on remuneration policies, related to governance requirements and the different approach to identify the staff to whom they apply a concern for firms regarding the level playing field between different investment firms (class 1 minus under CRD or class 2 under IFD), UCITS management companies and AIFMs, e.g. in terms of the application of the remuneration provisions, the ability to recruit and retain talent or with regard to the costs for the application of the requirements?
This queson is largely answered by the answer given to Q27.
Q29: Are the different provisions, criteria and thresholds regarding the application of derogations to the provisions on variable remuneration, and that they apply to all investment firms equally without consideration of their specific business model, a concern to firms regarding the level playing field between different investment firms (class 1 minus under CRD and class 2 under IFD), UCITS management companies and AIFMs, e.g., in terms of the application of the remuneration provisions, the ability to recruit and retain talent or with regard to the costs for applying the deferral and pay out in instruments requirements? Please provide a reasoning for your position and if possible, quantify the impact on costs and numbers of identified staff to whom remuneration provisions regarding deferral and pay out in instruments need to be applied.
From the ESIs of the CIMD Group, we understand that the applicaon of different thresholds in different jurisdicons (the power of each Member State, according to arcle 32.5 of the IFD) leads to unfair treatment that can generate compeve imbalances between EU countries. However, the competent authority of each Member State has informaon on each and every one of the ESIs that make up the local sector, which allows them to have a clear idea of the size of such ESIs. Thus, given that the establishment of these thresholds is intended to derogate from the general rule in order to reduce the burdens that may be placed on the ESIs to pay in instruments and to reduce the lack of compeveness due to the applicaon of the deferral, it may make sense that the threshold should be raised in order to make sense of its existence since, perhaps, keeping the threshold at €100 million would only apply to such a small number of ESIs that the objecve pursued, namely to reduce the burden on ESIs and maintain their compeveness, would be ineffecve.
On the other hand, we believe that, despite the CfA's own argumentaon in paragraph 241, the thresholds set for Class 1 minus and Class 2 ESIs to qualify for the exempon from payment in instruments are very different (5 billion with the possibility to increase it up to 15 billion for Class 1 minus ESIs, compared to 100 million and with the possibility to increase it up to 300 million for Class 2 ESIs). We consider the thresholds set for Class 2 ESIs to be very low, especially as they include off-balance sheet assets. Thus, an ESI with very small on-balance sheet assets, but with large but not necessarily very large off-balance sheet assets (e.g. assets under custody and management of clients), would have to pay in instruments when, given its size, it would probably have a shareholder and statutory structure that does not allow it to do so, making this requirement an obstacle to management.
In conclusion, we consider it appropriate to set higher thresholds for Class 2 ESIs to avoid payment in instruments and deferral and to be the same across the EU, thus avoiding discriminatory condions.
Q30: Are the different provisions regarding the oversight on remuneration policies, disclosure and transparency a concern for firms regarding the level playing field between different investment firm, UCITS management companies and AIFMs, e.g., with regard to the costs for the application of the requirements or the need to align these underlying provisions? Please provide a reasoning for your position.
Rather than a concern, the ESIs of the CIMS Group, we believe that the reporng obligaons should be the same in the same circumstances. Although we consider the informaon required from each of the three types of enes considered (ESIs, UCITS managements and FIA managements) to be sufficient and proporonate, we believe that UCITS and FIA managements that provide investment services should offer the same informaon and with the same requirements as ESIs.
Q31: What would be costs or benefits of extending existing reporting requirement to financial information? Which other elements should be considered before introducing such requirement?
ESIs are currently subject to a very high information burden, both accounting, financial and non-financial, either as a result of the regulations analysed in this CfA or others (sustainability, EINF, ...) so that to cover these obligations they are incurring, either through internal developments or by resorting to third party providers, very high costs and we could even say disproportionate to the objective pursued by the various regulators, which is none other than to provide information to market participants and users.
Consequently, we do not see the benefits of extending the current reporting requirements to financial information, but we are certain that such an extension would incur costs that are difficult to pass on to clients and, therefore, will reduce the already meagre performance of the ESIs or increase the losses that some are already incurring, thus jeopardising their continuity, leading the sector to a process of concentration that will undoubtedly be detrimental to investors.
Q32: Should there be the need to introduce prudential requirement for firms active in commodity markets and that are not currently subject to prudential requirements? How could the existing framework for investment firms be adapted for those cases? If a different prudential framework needs to be developed, what are the main elements that should be considered?
From the ESIs integrated in the CIMD Group we have no opinion.