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?

The key operational constraints of potentially removing the EUR 5 billion threshold for reporting:

1. Increased Reporting Requirements for All Firms:
   • Administrative Burden: All investment firms, regardless of total assets, must report detailed financial information. This significantly increases the administrative workload, especially for smaller firms with limited resources.
   • Data Collection and Reporting: Reporting financial data could be particularly challenging for firms not currently required to do so. This might necessitate new systems and processes to ensure compliance.
2. Resource Allocation and Costs:
   • Higher Operational Costs: Smaller firms may need to allocate additional resources to meet the new reporting requirements, leading to increased operational costs. This includes potential investments in technology and hiring additional staff.
   • Consultancy and Compliance Costs: Firms may need to seek external consultancy services to understand and implement the new reporting requirements, adding to their costs.
3. Impact on Smaller Firms:
   • Disproportionate Impact: The removal of the threshold could disproportionately affect smaller firms, which may find the additional compliance costs burdensome. This could impact their competitiveness and financial viability.
   • The barrier to Entry: Increased regulatory burden might deter new entrants into the market, affecting market dynamics and competition.
4. Data Management and Accuracy:
   • Data Integrity: Ensuring the accuracy and consistency of reported data could be challenging, particularly for firms without robust data management systems. There is a risk of errors and inconsistencies in reporting.
   • System Upgrades: Firms may need to upgrade their data management and reporting systems to handle the increased volume of data, which can be costly and time-consuming.
5. Regulatory and Supervisory Challenges:
   • Volume of Data: National competent authorities (NCAs) and the European Banking Authority (EBA) would need to process and analyze a significantly larger volume of data. This could strain their resources and potentially delay the monitoring and supervisory processes.
   • Risk of Regulatory Arbitrage: Without clear and consistent application of the new reporting requirements, firms might engage in regulatory arbitrage, manipulating their reporting to fall below certain thresholds.
6. Implementation Timeline and Transition:
   • Short-Term Disruptions: The transition to the new reporting regime could cause short-term disruptions as firms adapt to the new requirements. A phased implementation or transition period might be necessary to mitigate these disruptions.
   • Communication and Support: Effective communication and support from regulators will be essential to ensure that firms understand and comply with the new requirements. This includes detailed guidelines, FAQs, and possibly a helpdesk for queries.

Recommendations

To address these operational constraints, the following measures can be considered:

1. Phased Implementation:
   • Introducing the new reporting requirements in phases, starting with larger firms and gradually including smaller firms. This allows time for smaller firms to adapt and ensures a smoother transition.
2. Proportionality Measures:
   • Implement proportionality measures to ensure that the reporting burden is commensurate with the firm's size and complexity. Smaller firms could simplify reporting requirements to reduce the administrative burden.
3. Support and Guidance:
   • Provide detailed guidance and support to firms, including templates, examples, and training sessions. This helps firms comply with the new requirements and reduces the risk of errors.
4. Technology Solutions:
   • Encourage the use of technology solutions, such as automated reporting tools, to help firms manage the increased reporting burden efficiently.
5. Regular Review and Feedback:
   • Establish a mechanism for regular review and feedback from firms to continuously improve the reporting framework and address any issues that arise during implementation.

By addressing these operational constraints and implementing supportive measures, the transition to a new reporting regime without the EUR 5 billion threshold can be managed more effectively, ensuring a smoother transition for all stakeholders involved.

Q2: Would you suggest any further element to be considered regarding the thresholds used for the categorisation of Class 3 investment firms?

Here are additional elements to consider for the thresholds used in the categorization of Class 3 investment firms:

1. Quantitative and Qualitative Criteria:
   • Expand Beyond Quantitative Measures: While the current criteria are mostly quantitative, adding qualitative assessments can offer a more comprehensive view of a firm's risk profile. This includes evaluating the complexity of operations, governance structures, and risk management frameworks.
   • Risk-Based Approach: Introduce a risk-based approach that adjusts thresholds based on specific risks associated with different types of investment activities to ensure that firms with higher risk profiles are appropriately classified, even if their quantitative metrics are low.
2. Periodic Review and Adjustment:
   • Regular Threshold Review: Conduct regular reviews and adjustments of the thresholds to reflect changes in the financial market landscape, inflation, and overall economic conditions. This ensures that thresholds remain relevant and effective over time.
   • Feedback Loop: Establish a feedback mechanism where investment firms can report on the practical impacts of thresholds, allowing for data-driven adjustments.
3. Clarification and Simplification:
   • Clear Definitions: Ensure clear and unambiguous definitions of terms and conditions related to the thresholds. This includes specifying what constitutes total assets, consolidated assets, and other relevant metrics to avoid misinterpretation.
   • Simplified Calculations: To reduce administrative burdens and ensure consistency in application across firms, simplify the calculation methods for determining thresholds.
4. Proportionality and Fairness:
   • Proportional Requirements: Introduce proportional requirements that scale with the size and complexity of the firm. This can help small and non-interconnected firms manage compliance costs effectively.
   • Transition Periods: Provide transition periods for firms that newly qualify as Class 3 or move out of this classification, allowing them to adjust their operations and comply with new regulatory requirements without immediate disruption.
5. Enhanced Data Collection and Monitoring:
   • Comprehensive Reporting: Implement comprehensive reporting requirements that capture both quantitative and qualitative data. This can help regulators better understand the firm's operations and risk exposures.
   • Technology-Driven Monitoring: Use advanced data analytics and technology-driven solutions to monitor firms against the thresholds in real-time or near real-time. This enables proactive regulatory oversight and timely intervention.
6. Cross-Border Considerations:
   • Harmonization with International Standards: Where feasible, align thresholds with international regulatory standards to ensure consistency and reduce the potential for regulatory arbitrage.
   • Impact of Global Operations: Consider the impact of firms' global operations on their classification. This includes how cross-border activities might influence their risk profile and compliance requirements.
7. Stakeholder Engagement:
   • Industry Consultation: Engage with industry stakeholders to gather feedback on the thresholds and their impact. This helps in making informed decisions that consider firms' practical challenges.
   • Transparent Communication: Communicate transparently with firms about any changes to the thresholds, providing ample time and resources for them to adapt.

Summary of Recommendations

1. Incorporate Qualitative Criteria: Complement quantitative thresholds with qualitative assessments to capture a comprehensive risk profile of the firms.
2. Regular Updates and Feedback: Establish mechanisms for regular review and adjustment of thresholds, incorporating feedback from the industry to ensure they remain relevant and effective.
3. Simplification and Clarity: Provide clear definitions and simplify calculation methods to reduce ambiguity and administrative burden.
4. Proportional and Fair Requirements: Implement proportional requirements and provide transition periods to ensure fairness and manageability for small and non-interconnected firms.
5. Enhanced Monitoring and Data Collection: Leverage technology for enhanced monitoring and ensure comprehensive data collection to support regulatory oversight.
6. Consider Cross-Border Impacts: Align thresholds with international standards and consider the impact of global operations on firm classification.
7. Engage Stakeholders: Maintain ongoing dialogue with industry stakeholders to ensure that the thresholds and related regulatory measures are effective and balanced.

By addressing these elements, the regulatory framework can be refined to better suit the diverse nature and risk profiles of Class 3 investment firms, ensuring effective oversight while minimizing undue burdens.

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?

The potential ways forward regarding the transition of investment firms between Class 2 and Class 3 should focus on ensuring clarity, proportionality, and manageability. Here are specific views on the possible ways forward:

1. Clear and Consistent Criteria:
   • Definitive Thresholds: Establish clear and specific thresholds for the transition from Class 2 to Class 3. This involves defining precise quantitative metrics, such as total assets, client orders handled, and other relevant financial indicators.
   • Qualitative Assessments: Incorporate qualitative assessments to ensure that the firm's nature and risk profile are considered alongside quantitative measures. This helps make more informed and accurate classifications.
2. Proportional Transition Periods:
   • Grace Periods: Implement grace periods during which firms can adjust their operations and comply with new regulatory requirements after transitioning between classes. For example, a six-month period could be given for firms to meet the obligations of their new classification.
   • Gradual Implementation: The new requirements should be gradually implemented, particularly for firms moving from Class 3 to Class 2, to mitigate operational disruptions and financial strain.
3. Regular Monitoring and Review:
   • Continuous Monitoring: Establish a system for continuously monitoring firms' metrics to identify when they approach the transition thresholds. This will help provide timely guidance and support.
   • Annual Reviews: Conduct annual reviews of firms' classifications to ensure they remain appropriate and adjust classifications as necessary based on the latest data.
4. Transparent Communication and Support:
   • Clear Communication: Communicate clearly and transparently with firms about their classification status, the criteria for transition, and the steps they need to take when transitioning between classes.
   • Regulatory Guidance: Provide detailed guidance and support to firms undergoing transition, including regulatory resources, training, and advisory services to help them comply with new requirements.
5. Data-Driven Decision Making:
   • Comprehensive Data Collection: Ensure comprehensive data collection and analysis to support decision-making regarding firm classification. This includes capturing both quantitative and qualitative data relevant to the firms' operations and risk profiles.
   • Advanced Analytics: Utilize advanced data analytics to identify trends and predict when firms are likely to transition between classes, allowing for proactive regulatory intervention.
6. Consideration of Firm-Specific Circumstances:
   • Tailored Approaches: Recognize that each firm may have unique circumstances that affect their transition between classes. Tailor regulatory approaches to account for these individual differences, ensuring that the transition process is fair and manageable.
   • Exceptional Cases: Establish protocols for handling exceptional cases where firms may need additional time or support to transition due to specific challenges or complexities in their operations.

Recommendations

To ensure an effective and manageable transition process for investment firms between Class 2 and Class 3, the following recommendations should be considered:

1. Establish Clear Criteria: Define clear and precise quantitative thresholds for transition, complemented by qualitative assessments to capture the full risk profile of firms.
2. Implement Proportional Grace Periods: Provide grace periods and gradual implementation schedules to help firms adjust to their new classification and regulatory requirements.
3. Continuous Monitoring and Annual Reviews: Implement continuous monitoring systems and conduct annual reviews to ensure timely and accurate classification of firms.
4. Transparent Communication and Guidance: Maintain open communication with firms and provide detailed guidance and support throughout the transition process.
5. Leverage Data and Analytics: Utilize comprehensive data collection and advanced analytics to inform decision-making and predict transitions.
6. Tailor Approaches for Individual Firms: Recognize firm-specific circumstances and tailor regulatory approaches to ensure fair and manageable transitions, with protocols for handling exceptional cases.

By adopting these recommendations, the transition process between Class 2 and Class 3 can be streamlined and made more efficient, ensuring that firms are adequately supported and that regulatory objectives are met effectively.

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?

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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?

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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?

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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?

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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?

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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?

To further specify for the purpose of calculating the K-AUM. Clarifying this concept can help distinguish between recurring and one-off investment advice, ensuring that the K-AUM calculation accurately reflects the risk profile associated with continuous advisory services. Here are the elements to consider:

1. Frequency of Advice:
   • Regular vs. One-Off Advice: Define ongoing advice as investment advice provided on a regular basis, such as quarterly or annually, as opposed to one-off consultations or ad-hoc recommendations.
   • Scheduled Reviews: Include periodic reviews and updates of investment strategies or portfolios as part of ongoing advice.
2. Duration and Continuity:
   • Long-Term Engagements: Characterize ongoing advice by the duration of the advisory relationship. Long-term engagements, typically lasting more than one year, should be considered ongoing.
   • Continuous Monitoring: Consider the continuous monitoring of client portfolios and regular adjustments based on market conditions as part of ongoing advice.
3. Scope of Services:
   • Comprehensive Advisory Services: Define ongoing advice to include comprehensive services that cover a broad range of financial instruments and investment strategies, as opposed to advice on a single transaction or limited set of products.
   • Holistic Financial Planning: Includes financial planning services that address various aspects of a client’s financial situation, such as retirement planning, tax optimization, and estate planning.
4. Client Relationship Management:
   • Dedicated Advisory Support: Ongoing advice typically involves a dedicated advisor or advisory team that maintains regular contact with the client, providing continuous support and updates.
   • Proactive Engagement: Characterize ongoing advice by proactive engagement, where advisors actively reach out to clients with recommendations and adjustments rather than waiting for client-initiated contact.
5. Documentation and Record-Keeping:
   • Regular Reports: Ongoing advice should involve the provision of regular reports to clients, detailing the performance of their investments and any recommended changes.
   • Formal Agreements: Specify that ongoing advice is usually governed by formal advisory agreements outlining the terms, frequency, and scope of services provided.
6. Regulatory and Compliance Considerations:
   • Adherence to Standards: Ensure that the definition of ongoing advice aligns with existing regulatory standards and guidelines, such as those set by MiFID II and other relevant frameworks.
   • Disclosure Requirements: Include requirements for advisors to disclose the nature and frequency of their advisory services to clients, distinguishing ongoing advice from one-off advice.

Recommendations for Distinguishing Recurring Provision of Investment Advice from One-Off Advice

1. Define Clear Criteria: Establish clear criteria for what constitutes ongoing advice, including frequency, duration, scope, client relationship management, and documentation.
2. Regular Engagement and Monitoring: Emphasize the importance of regular engagement, continuous monitoring, and proactive client support as key characteristics of ongoing advice.
3. Comprehensive Services: Ensure that ongoing advice encompasses comprehensive financial planning and advisory services, rather than limited or transactional advice.
4. Formal Agreements and Documentation: Require formal advisory agreements and regular reporting to clients to document the provision of ongoing advice.
5. Alignment with Regulatory Standards: Align the definition and requirements of ongoing advice with existing regulatory standards to ensure consistency and compliance.

By specifying the concept of ongoing advice more clearly, investment firms can better calculate the K-AUM, reflecting the true risk associated with continuous advisory services and ensuring more accurate regulatory capital requirements.

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?

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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?

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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?

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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?

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Q14: Should crypto-assets be included into K-factor calculation, either as a new K-factor or as part of K-NPR?

The inclusion of crypto-assets into K-factor calculation can be approached in two ways:

1. New K-Factor for Crypto-Assets: Introduce a new K-factor specifically for crypto-assets. This factor could be based on the market value or volume of crypto-assets held, adjusted for their volatility and liquidity risks. This K-factor could be designed to reflect the value and risk profile of crypto-asset holdings, ensuring that firms hold adequate capital to cover potential losses.
   • K-CA (Crypto-Asset Factor): Calculate the K-CA based on the potential loss of value from crypto-assets, taking into account their volatility and historical price movements.
2. Integration into K-NPR: Widen the scope of the existing K-NPR (Net Position Risk) to include crypto-assets. This would capture the market risk associated with crypto-assets within the current framework.

   • Adjusted K-NPR: Include crypto-assets in the calculation of K-NPR, applying a higher risk weight to account for their higher volatility compared to traditional financial instruments.

     It is important to ensure that the treatment of crypto-assets in the K-factor calculation aligns with international standards and guidelines, such as those proposed by the Basel Committee on Banking Supervision (BCBS). This promotes consistency and reduces the risk of regulatory arbitrage across jurisdictions. By considering these approaches, the prudential framework can effectively capture the risks associated with crypto-assets while maintaining a proportional and practical regulatory environment for investment firms.

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?

To ensure that the requirements are proportionate to the trading activities of investment firms, the following elements should be considered:

1. Threshold-Based Approach: Implement a threshold over which operational risk requirements apply. This can help ensure that smaller firms with limited trading activities are not unduly burdened.
2. Granular Risk Assessment: Develop a more granular approach and scalable framework to operational risk assessment, distinguishing between different types of trading activities and their associated risks. For instance, high-frequency trading might pose different risks compared to proprietary trading. This could include thresholds that trigger higher capital requirements as trading volumes or the complexity of trades increases.
3. Proportional Capital Charges: Introduce proportional capital charges based on the scale and complexity of the trading activities. This could involve scaling the capital requirements in line with trading volumes or transaction values. Utilization of historical data on operational risk events to calibrate capital requirements. Firms should be required to report operational risk events, which can help in better assessing the actual risk levels and adjusting capital requirements accordingly.
4. Enhanced Risk Management Requirements: Mandate enhanced risk management frameworks for firms with significant trading activities. This can include specific policies and procedures to manage operational risks effectively. Encouraging firms to adopt robust operational risk management practices. This includes regular risk assessments, internal controls, and stress testing to ensure firms are prepared for potential operational risk scenarios.
5. Integration with Existing K-Factors: Considering how operational risk can be integrated with existing K-factors, such as K-DTF, to avoid redundancy and ensure a holistic approach to risk management
6. Scenario Analysis and Stress Testing: Require firms to conduct scenario analysis and stress testing tailored to their trading activities to better understand potential operational risks and their impact on capital requirements.

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)?

If alternative approaches to K-DTF are suggested, they should clearly delineate how they address the two activities: trading on their own account and execution on their own account on behalf of clients. Possible alternatives could include:

1. Activity-Based Approach: Separate K-DTF into two distinct components – one for proprietary trading and another for client execution. When the capital requirements are separated for different activities, trading on its own account could be capitalized using a factor based on market risk exposure, while execution on behalf of clients could use a factor reflecting transaction volume or value. This can help tailor capital requirements more precisely to the specific risks associated with each activity.
2. Operational Risk Capital Buffer: Calculate the K-DTF based on a percentage of the revenues generated from trading and execution activities. Introducing this an additional operational risk capital buffer specifically for firms executing orders on their own name. This buffer would be based on historical loss data and the firm’s operational risk profile. This can align the firm's capital requirements with the scale of the firm's operations.
3. Hybrid Model: Combining elements of both the basic indicator approach and the standardized approach. For instance, using a base capital charge for trading on own account, supplemented by an additional charge based on the volume or complexity of client orders executed on the firm’s name.
4. Simplified Calculation Method: For smaller firms, a simplified method could be used where a fixed percentage of revenue or trading volume is set as the capital requirement for operational risk, ensuring proportionality and ease of implementation.
5. Transaction Volume-Based Approach: Use the volume or value of transactions to calculate K-DTF to ensure that firms with higher trading volumes hold more capital to cover potential operational risks.

Q17: When addressing other activities an investment firm may perform, which elements, on top of the discussed ones, should be also taken in consideration?

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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?

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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?

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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?

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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?

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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?

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Q23: What other elements should be considered in removing the possibility of the exemption in Article 43 of the IFR?

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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?

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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?

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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?

In addition to the elements discussed in Sections 5.2, 5.4, and 9.1, while reviewing the influence of crypto-assets on the IFD and IFR, additional elements to consider include: 

1. Integration with Existing K-Factors: Assess how crypto-asset exposures and services can be integrated into existing K-factors to avoid creating new, complex requirements unless absolutely necessary
2. Volatility and Liquidity Risks: Addressing the high volatility and liquidity risks associated with crypto-assets. This could involve setting higher capital requirements for crypto-assets to account for their price instability. Develop clear guidelines on the valuation of crypto-assets and their impact on liquidity risk management. This should include stress testing and scenario analysis specific to crypto-assets.
3. Custody and Safekeeping: Ensuring that firms have robust mechanisms for the custody and safekeeping of crypto-assets, which is critical given the security risks associated with digital assets.
4. Technology and Cybersecurity Risks: Highlighting the technology and cybersecurity risks unique to crypto-assets. Investment firms should have enhanced cybersecurity measures and disaster recovery plans to mitigate potential losses from cyber-attacks or technological failures. Ensuring that firms have robust cybersecurity measures in place.
5. Regulatory Arbitrage Prevention: Ensuring that the prudential framework prevents regulatory arbitrage between traditional financial instruments and crypto-assets. Consistent regulatory treatment is crucial to avoid firms shifting activities to less regulated areas.
6. Interconnectedness and Systemic Risk: Considering the interconnectedness of crypto-assets with the broader financial system. The framework should assess and mitigate systemic risks that could arise from significant crypto-asset exposures.

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?

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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?

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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.

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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.

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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?

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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?

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