New EU Directives and Regulations Affecting CIFs – Interview with Tal Ron and Stephanie Attias

Further to the recent publication of new EU Directives and Regulation in the Official Journal of the European Union, LeapRate has interviewed two of the most prominent legal experts in financial regulation: Advocate and Notary Tal Itzhak Ron, and Financial Jurist Stephanie Attias, from the Law Firm Tal Ron Drihem & Co. to give us a sense of today’s regulatory overview and the upcoming impacts of such legislative Acts for CIFs.

Tal, Stephanie, can you please give us a brief summary on the EU Legislative situation today?

Following the global financial crisis, the European Commission decided to review the MiFID I framework and on October 20th, 2011 published proposals for a revised Directive MiFID II and a new Regulation MiFIR. On June 12th 2014, various Directives and Regulations were published in the Official Journal of the European Union: The European Directive 2014/65/EU on Markets in Financial Instruments (MiFID II) and The European Regulation (EU) No 600/2014 on Markets in Financial Instruments (MIFIR).

Tal Ron

This Regulation is binding and directly applicable in all Member States. The persons to whom it is addressed, must apply it from January 3rd, 2017 except for the provisions of MiFID II’s Article 65(2), which must be applied from September 3rd, 2018.

Such Legislative Acts are bound to have considerable effects on the way Cyprus Investment Firms operate, as The Cyprus Securities and Exchange Commission intends to proceed immediately with the transposition of such Directives into Cypriot Law.

The new framework aims to make financial markets more efficient, resilient and transparent, thereby introducing a market structure which reduces regulatory gaps and ensures that trading, wherever appropriate, takes place on regulated platforms.

How does “MiFID I” differ from “MiFID II”?

MiFID’s objective was to increase the integration and efficiency of EU financial markets by establishing a harmonized regulatory framework, via EU Passporting, for the provision of investment services in financial instruments across the EU and for the operation of regulated markets by market operators. To that extent, MiFID I was mainly a Compliance matter for private banking and many investment firms.

MiFID II on the other hand, introduces a range of measures which seek to address consequences of MiFID I and issues raised by the financial crisis, such as: making financial markets more efficient, resilient and transparent, improving investor protection, increasing reporting obligations, setting trade restrictions and limits, increasing governance and control.

MiFID II questions strategy and business models, and could therefore affect a wide range of a firm’s functions from: client services, to IT requirements, and specific HR systems.


Provisions contained in MiFID II are organized according to Level 1 texts, and Level 2 texts. Level 1 texts (adopted by the European Parliament on April 15th, 2014 and the Council on May 13th 2014), provide the main requirements and obligations. However, key technical details on the precise meaning and implementation of these requirements are known as the Level 2 texts of MiFID II.

Recent Level 1 Texts amend the MiFID I regime by:

• Providing net position limits and reporting of positions in commodity derivatives;

• Adopting a harmonized regime for the provision of services by third-country investment firms to professional clients and eligible counterparties within the EU. Third-country firms serving the EU will have to establish a branch in each EU country where they operate;

• Introducing specific systems and control requirements for algorithmic trading firms and trading venues, in particular those investment firms running market making algorithms;

• Developing market stability measures to deal with the increase in High Frequency Trading (HFT) participants, for example by removing the own account trading exemption for HFT strategies and enabling venues to create fee structures for excessive order cancellation and systems use, as well as specific requirements for minimum tick sizes;

• Implementing a requirement for the ‘straight-through-processing’ (STP) of cleared derivative transactions from trade to clearing house as quickly as technically possible;

• Introducing a new category of trading venue for non-equity instruments, the Organized Trading Facility (OTF);

• New Rules and Requirements for the exchange trading of derivative contracts;

• Enhancing pre- and post-trade transparency and transaction reporting provisions for equities and introducing such transparency for non-equities; and

• Requiring non-discriminatory access between trading venues and clearing houses, and vice versa.

On May 22nd, 2014 ESMA launched its Level 2 consultation process with the publication of: a Consultation Paper on ESMA’s technical advice on MiFIDII/R delegated acts that it must provide to the European Commission by December 2014; and a Discussion Paper on draft RTS/ITS, the responses to which are intended to provide the basis for a further consultation paper to be issued in late 2014-early 2015.

The deadline for both Discussion and Consultation Papers is August 1st, 2014. Once these have been completed and ESMA has submitted its advice and technical standards to the Commission, the Commission will then publish its final Level 2 texts, thereby implementing regulations for MiFIDII/R.

What do you think firms need to do now?

CIF’s need to start planning and clearly assessing the impacts of such Directives and Regulation on the nature of their activities because changing a business model may take months.

Firms will need to consider amongst other things: the implications of the regime of position limits and position reporting, how to comply with new transparency requirements, firms currently operating multilateral trading systems will need to decide how they fit into the new trading landscape, firms currently operating bilateral trading systems will need to consider whether their activity will lead to them becoming SIs, firms trading commodity derivatives who are not currently authorized under MiFID will need to examine whether they can continue to remain exempt from authorization.

It is important to seek ongoing legal advice as financial regulation is constantly evolving and affecting your business.

You previously stated that the provisions of MiFID II’s Article 65(2) are the only provisions which must be applied from September 3rd, 2018 instead of January 27th 2014, what will firms need to do from September 3rd, 2018?

Indeed, the provisions of MiFID II’s Article 65(2) are the only provisions which must be applied from September 3rd, 2018 instead of January 27th, 2014 (date at which the other Articles contained in MiFID II must be implemented).

Article 65(2) increases Transparency Requirements by stating that “the home Member State shall require a CTP (Certified Treasury Professional) to have adequate policies and arrangements in place to collect the information made public, consolidate it into a continuous electronic data stream, and make this information available to the public as close to real time as is technically possible, on a reasonable commercial basis including, at least, the following details: the identifier or identifying features of the financial instrument; the price at which the transaction was concluded; the volume of the transaction; the time of the transaction; the time the transaction was reported; the price notation of the transaction; the code for the trading venue the transaction was executed on, or where the transaction was executed via a systematic internalize the code ‘SI’ or otherwise the code ‘OTC’; if applicable, an indicator that the transaction was subject to specific conditions.”

This information shall be made available free of charge 15 minutes after the CTP has published it. The home Member State shall require the CTP to be able to efficiently and consistently distribute such information in a way that ensures fast access, on a non-discriminatory basis, and in generally accepted formats that are easily accessible and utilizable for market participants.

In CySec’s Circular to CIF’s sent on June 17th, 2014 The Cyprus Securities and Exchange Commission also spoke about another European Directive (2014/59/EU) which would establish a Framework for Recovery and Resolution of Credit Institutions and Investment Firms (RRD), could you tell us a little more about this?

The Directive on the Recovery and Resolution of Credit Institutions and Investment Firms (BRRD) and the recast Directive on Deposit Guarantee Schemes (DGS) have been published in the EU Official Journal. The BRRD provides a complete framework for the crisis management of banks, while the DGS Directive strengthens the protection of citizens’ deposits in case of bank failures.

Member States must now transpose both texts into their national legislation within the defined timeline, and are obliged to transpose this Directive into national law by December 31st, 2014 and the persons, to whom this directive is addressed, must apply it from January 1st, 2015.

A few words to conclude?

To conclude, we can see that the 2007-08 financial crisis has made it hard to assess the growth, development and stability of financial services in the EU. This crisis has raised profound questions about the nature and effectiveness of financial regulation, including cross-border regulation. Today, European focus seems to be set on fixing unregulated aspects of financial services in order to increase transparency and investor protection, whilst continually working towards greater international regulation.

About the Interviewees

Advocate, Notary and Computer Scientist Tal I. Ron graduated from Haifa University School of Law (LL.B.) and Faculty of Computer Science (B.Sc.), and further obtained a Master Degree in Computer Science from Bar Ilan University (M.Sc). After working in the prestigious law firm of Gornitzky & Co., Tal with his innovative spirit, became one of the first International lawyers specializing in Financial Technologies, FX, Binary Options, Digital Currencies, Gaming, Affiliates and Online Capital practices, advising the top tier of international clients in these fields. Over the years Tal gained extensive knowledge in High-Tech law, Financial and Gaming regulation, Company formation, International Taxation and Payment services.

Today his international law firm, boasting a team of 18 highly seasoned lawyers operating from Tel Aviv, Limassol, London and British Anguilla, is one of the most competent in the industries of Financial Technology, Gaming, e-Commerce. Tal as a member of International Masters of Gaming Law (IMGL) provides legal consultation and representation to worldwide companies and assists numerous start-ups to become successful companies and major players in the industry.

Financial Jurist Stephanie Attias graduated from the Faculty of Law in Nice (France) with an L.L.B in Law and Political Science, and further obtained a Master of Business Law and Economics, followed by a Master in Financial Engineering with Magna Cum Laude Honors. After working in the Securitization Department of the prestigious law firm of Gide Loyrette Nouel in London and Paris, Stephanie joined Tal Ron Drihem & Co.’s Law Firm in 2013 as Head of European and Financial Law. Stephanie advises top international clients, and has gained experience in Financial and Gaming regulation, Company formation, and High-Tech Law Agreements. She is also a sought-after speaker for conferences and events in the industry, presenting in major conferences worldwide in Israel and Europe.


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