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The European Securities and Markets Authority (ESMA) on Monday published its final technical standards (TS) regarding the Markets in Financial Instruments Directive (MiFID II), the Market Abuse Regulation (MAR), and the Central Securities Depositaries Regulation (CSDR).
ESMA’s TS explain how the legislation will apply in practice to market participants, market infrastructures and national supervisors. The new TS aim to change the functioning of European financial markets by increasing their transparency, safety and resilience, as well as beef up investor protection.
Steven Maijoor, ESMA Chair, commented:
“The rules put out by ESMA today on MiFID II, MAR and CSDR will notably change the way Europe’s secondary markets function. And this will no doubt impact market participants and regulators alike. The magnitude of this change should not be underestimated. But the past has taught us that change is needed in order to make markets more transparent, efficient, and safer to invest in. This will entail a certain cost but we should not forget the other side of this equation, which is the great benefits safer and sounder markets will bring to everybody.”
MiFID II, once implemented, is set to bring the majority of non-equity products into a robust regulatory regime and move a significant part of OTC trading onto regulated platforms. The key rules introduce:
• tests to determine whether a non-financial firm’s speculative investment activities are so great that it should be subject to MiFID II;
• ranges for the new EU-wide commodity derivatives position limits regime;
• rules governing high-frequency-trading, imposing a strict set of organisational requirements on investment firms and trading venues;
• provisions regulating the non-discriminatory access to central counterparties (CCPs), trading venues and benchmarks, designed to increase competition;
• provisions requiring trading venues to offer disaggregated data on a reasonable commercial basis;
• thresholds for the pre- and post-trade transparency regimes extended to equity-like instruments, bonds, derivatives, structured finance products and emission allowances;
• a newly introduced liquidity assessment for non-equity instruments;
• a newly-introduced trading obligation for shares and certain derivatives to be traded only on regulated platforms and, in the case of shares, systematic internalisers, instead of over-the-counter;
• a double volume cap mechanism to limit dark trading and reshape the use of waivers for shares and equity-like instruments;
• newly introduced reporting requirements for commodity derivatives;
• improved disclosure to strengthen the best execution regime.
- MAR aims to increase market integrity and investor protection.
MAR TS contain prohibitions for insider dealing and market manipulation, and provisions to prevent and detect these.
- CSDR seek to harmonise functioning of European central securities depositories.
ESMA has sent the final draft TS to the European Commission, which has three months to approve these. If endorsed, both the European Parliament and the Council have an objection period.
After CSDR, which entered into force back in 2014, MAR and MiFID II are poised to enter into force in 2016 and 2017 respectively. MiFID II / MiFIR will only be applied as of January 3, 2017.
To view the official report from ESMA on MiFID II, click here.