RAPTOR HeadlinesMarch 2016 | Volume 3Your quick guide to recent fund regulations

© 2016 Indus Valley Partners | 01

Dear Valued Customer,

Welcome to the 3rd periodical of RAPTOR Headlines, designed specifically to give you a headline update of the current happenings in the

hedge funds regulatory world vis-à-vis how our product is evolving with it. This publication will give you a quick summary of the recent

updates released by ESMA, SEC, NFA and Albourne.

Form CPO

NFA has launched a new dashboard replacing the existing ORS page. It comprises a single screen summarizing all the outstanding filing

requirements for the users to immediately access the open items. Users can see the dashboard on NFA's home page by using their existing ORS

login and password.

Here is the link to understand more features of the new system through a seminar hosted by NFA.

AIFMD

• ESMA is currently assessing certain Non EU Jurisdictions - Hong Kong, Singapore, United States of America, Australia, Bermuda, Canada, the

Cayman Islands, Isle of Man and Japan - to decide whether to extend the AIFMD marketing passport to these non-EU AIFMs. If ESMA advises to

extend the passport to any of these countries, then under AIFMD, the commission is obliged to prepare and propose delegated legislations

within three months of receipt of such advice to implement the rules set out in Articles 37-41 of the AIFMD (Passport for non EU AIFMs and

non-EU AIFs) with respect to the countries which have been assessed. The European Commission has requested that ESMA complete the

assessment of these countries by 30th June, 2016.

• The Netherlands Central Bank (“DNB”) and the Netherlands Authority on the Financial Markets (“AFM”) issued a statement informing that no

reporting profile will currently be allocated to non-EU AIFMs and no enforcement action will be taken with regards to the reporting obligation

of these non-EU AIFMs for the time being.1

To keep a track of AIFMD updates, you may visit this link.

Form PF

There have been no material updates from SEC on Form PF in the past one month. To keep a track of the updates, you may visit this link.

OPERA

There have been no material updates from Albourne on OPERA in the past one month. To keep a track of the updates, you may visit this link.

EMIR 2

ESMA has updated its existing EMIR Q&A clarifying its approach on the frontloading requirements adopted in first RTS and how clearing

obligations are applicable to trade novations and to swaps resulting from the exercise of a swaption. It has also updated CCP questions dealing

with requirement on a CCP for portability of client assets in a member default scenario – for both individual and omnibus account, access to data

by the competent authorities irrespective of whether the report for a derivative contract has been accepted or rejected by the TR, in accordance

with the procedures put in place by the TR to comply with the requirements under Articles 19(a) and 19(b) of Commission Delegated Regulation

150/2013, values to be reported in notional in position level reports.

1 Source: http://www.dnb.nl/en/statistics/eline-dnb/aifmd/news-archives/dnb316640.jsp2 Source: https://www.esma.europa.eu/press-news/esma-news/esma-updates-emir-qa

RAPTOR HeadlinesMarch 2016 | Volume 3Your quick guide to recent fund regulations

© 2016 Indus Valley Partners | 02

Upcoming Regulations - MiFID II 4

In mid-February, the European Commission proposed extension of one year to all national competent authorities and market participants in

application of the revised MiFID II making the new deadline as 3rd January 2018. This was done because of the intricate technical infrastructure

that needs to be set up for data collection, reporting and the transparency threshold calculations in the MiFID II package to ease out the

implementation challenges faced by regulators and market participants.

ESMA needs to work with market participants and competent authorities to collect data from about 300 trading venues on about 15 million

financial instruments. According to ESMA, neither competent authorities nor market participants would have the systems arrangement done by

the initial scheduled date and hence, it became necessary to extend the deadline. However, the European Commission confirmed that the

extension is to overcome technical limitation and it will not impact any timelines in the adoption of the 'level II' implementing measures under

MiFID II/MiFIR in order to provide legal certainty to new provisions.

Other regulatory news

Securities & Futures Commission of Hong Kong updates FAQ on Leveraged and Inverse Products 5

• All swap-based L&I Products will carry an annotation “*This is a synthetic product” right after its name so that all investors can easily

differentiate L&I products from other ones.

• At the very minimum, an L&I Product performance under three different market conditions - upward trend, downward trend and volatile -

need to be disclosed in the offering documents.

• An L&I Product also has to make available a “performance simulator”, which allows investors to select a historical time period and simulate its

performance during that period based on historical data. The performance simulator should display the following minimum information

• the performance of the L&I Product, measured by its NAV; and

• the performance of the non-leveraged, non-inverse version of the underlying index tracked by it

Hope it was informative. Any feedback or suggestion is always welcome. Should you require more information, please drop in a mail to

raptorsupport@ivp.in and we would be happy to get on a one-on-one discussion with you.

We look forward for a collaborative partnership with you to simplify your filings experience.

Sincerely,

3 Please refer Annex A for detailed updates on these questions4 Source: https://www.fca.org.uk/your-fca/documents/minutes-of-mi�d-ii-implementation-trading-venue-roundtable-february-20165 Source: http://www.sfc.hk/web/EN/faqs/product-authorization/leveraged-and-inverse-products.html

Summary of questions updated 3

OTC Questions

CCP Questions

TR Questions

QUESTION TYPE QUESTION NO.

17

20

3

37

41

TOPIC OF THE QUESTION

Frontloading requirement for the clearing obligation

Clearing obligation

Default management

Access to Data by the authorities

Reporting of notional in position reports

RELEVANT ARTICLE

Article 4(1)(b)(ii) of EMIR

4 of EMIR

48 of EMIR

81 of EMIR

9 of EMIR

RAPTOR Headlines

© 2016 Indus Valley Partners | 03

Your quick guide to recent fund regulations March 2016 | Volume 3

ivp.in

Annex A: Detailed Q&A Updates on EMIR

Frontloading requirement for the clearing obligation

OTC - 17

OTC - 20

CCP - 3

TR - 37

TR - 41

The approach to frontloading requirement pursuant to Article 4(1)(b)(ii) of EMIR has been clarified in the first RTS on the clearing obligation. As per Article 4 of this RTS, the minimum remaining maturities are defined such that frontloading only applies to contracts concluded a certain number of months after the entry into force of the RTS on the clearing obligation, by counterparties in Category 1 or 2. As a result, OTC Question 17(a)which referred to the application of frontloading for contracts concluded before the entry into force of the RTS has been deleted

UPDATED Q. NO. TOPIC DETAILS

Clearing Obligations for OTC derivative contracts - Trade Novations and Swap

EMIR requires to clear the OTC derivative contracts (pertaining to a class of OTC derivatives that has been declared subject to the clearing obligation) including a swap which results from the exercise of a swaption that are entered into or novated (covering all type of trade novations) either on or after the date from which the clearing obligation takes effect or during the frontloading period detailed in Article 4(1)(b)(ii) and under certain conditions.

Default Management where Article 48 of EMIR establishes the circumstances under which a CCP must transfer/liquidate the assets and positions of the clients of defaulted clearing member

CCP is required to transfer the assets and positions recorded as being held for the account of the clients of the defaulted clearing member if the conditions defined in Article 48 are met else, the CCP may try to transfer the assets and positions, on a best effort basis, but ultimately has the right to liquidate the assets and positions.

If the assets of a client of the defaulted clearing members are only partially liquidated then the non-liquidated portion of the assets will be returned to the clients when they are known to the CCP or, if they are not, to the clearing member for the account of its clients

Access to data by authorities where it is mentioned that transaction data should include individual trade details

Trade Regulators are required to reconcile the details of derivatives under Article 19(c) of Commission Delegated Regulation 151/2013, of 19 December 2012, and in those cases where the counterparties report to two different TRs, the transaction data comprises the data sets reported by the two counterparties to the two different TRs irrespective of whether the report for a derivative contract has been accepted or rejected by the regulator

Reporting of Notional positions requiring that all the data 92 elements that are required in trade reports are mandatory in position reporting, with the exception of those that are relevant only at trade level.

The value to be reported in “Notional” field in position level reports:

• For options: Notional = Quantity x Price Multiplier x Strike Price

• For futures: Notional = Quantity x Price Multiplier x Settlement Price

The reporting of modifications to the Notional for positions should take place only if an event relevant for the position has taken place, e.g. a new trade relevant for the position has been concluded and reported. If any field used to calculate a Notional is populated with “999999999999999,99999” (standing for “not available” in numeric fields), such value should not be used for the relevant calculations.