Market Abuse Regulation

ESMA 2018 Regulatory Work Program

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On February 8, the European Securities and Markets Authority (“ESMA”) published its 2018 regulatory work program, which provides a detailed breakdown of the individual work streams outlined in the 2018 work program. The areas covered in the regulatory work program include the following initiatives: European Social Entrepreneurship Funds (EuSEF) Regulation, European Venture Capital Funds (EuVECA) Regulation, EMIR, MiFID II, Market Abuse Regulation (MAR), Securities Financing Transactions Regulation (SFTR) and Proposed Regulation establishing a framework for the recovery and resolution of central counterparties (CCPs).

The 2018 regulatory work program can be found here.

ESMA has Published a Further Version of its Q&As on the MAR

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The European Securities and Markets Authority (“ESMA“) published a further version of its Q&As on the Market Abuse Regulation (“MAR“) on November 21, 2017.

The two new questions and answers are on the following topics:

  • ESMA states that the insider dealing prohibition in Article 14 of MAR applies during closed periods referred to in Article 19(11) of MAR in the same way as it does at any other time. Therefore a person discharging managerial responsibilities (“PDMR“) must also comply with Article 14. When an issuer allows a PDMR to trade under Article 19(12) of MAR, the PDMR must always give consideration as to whether or not the relevant transaction would constitute insider dealing.

ESMA states that the types of transaction by a PDMR prohibited during a closed period under Article 19(11) of MAR are the same as those types of transaction subject to the notification requirements set out under Article 19(1) of MAR, although Article 19(11) of MAR only applies to a PDMR when conducting transactions on its own account or for the account of a third party, whereas the notification of transactions required under Article 19(1) of MAR also applies to persons closely associated to a PDMR.

ESMA Issues Final Guidelines on Inside Information and Commodity Derivatives under MAR

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On September 30, 2016, the European Securities Markets Authority (“ESMA“) published final guidelines (ESMA/2016/1412) on information relating to commodity derivatives disclosable under the Market Abuse Regulation (Regulation 596/2014) (“MAR“).

Article 7(5) of MAR requires ESMA to issue guidelines to establish a non-exhaustive list of information that is reasonably expected or required to be disclosed in accordance with legal or regulatory provisions in EU or national law, market rules, contract, practice or custom, on the relevant commodity markets or spot markets.

ESMA expects market participants, investors and regulators to take the list of examples provided in the guidelines into account when assessing whether information is “inside” information. It should be noted that other conditions of the definition not covered by the new guidelines should also be taken into account.

ESMA also explains that the guidelines do not create any further information disclosure requirements, as the concept of “required to be disclosed” refers to existing or future disclosure requirements (such as, under national law), independent of the guidelines.

National competent authorities (“NCAs“) have two months from the issuance of the different language versions of the guidelines to confirm whether or not they intend to comply with them. If a NCA does not comply or does not intend to comply, it will have to inform ESMA, stating its reasons.

ESMA consulted on the guidelines in March 2016 (ESMA/2016/444).

Delegated Regulation under MAR Covering Indicators of Market Manipulation, Disclosure Thresholds, Trading During Closed Periods and Notifiable Managers’ Transactions

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The European Commission’s Delegated Regulation supplementing the Market Abuse Regulation (Regulation 596/2014) (MAR) as regards an exemption for certain third countries’ public bodies and central banks, the indicators of market manipulation, the disclosure thresholds, the competent authority for notifications of delays, the permission for trading during closed periods and types of notifiable managers’ transactions, was published in the Official Journal of the EU on 5 April 2016.

The Delegated Regulation specifies:

  • The public bodies and central banks of third countries benefitting from the exemption under Article 6(1) of MAR.
  • The indicators of market manipulation set out in Annex I of MAR.
  • The minimum thresholds for the exemption of certain participants in the emission allowance market from the requirement to publicly disclose inside information.
  • The competent authority that should be notified concerning delays in the public disclosure of inside information.
  • The circumstances under which trading in a closed period may be permitted by an issuer.
  • The types of transactions that would trigger the notification requirement under Article 19 of MAR.

The Delegated Regulation enters into force on April 24, 2016 and will apply from July 3, 2016.

ESMA Consults on Guidelines on Disclosure of Information on Commodity Derivatives Markets or Related Spot Markets under MAR

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On March 30, the European Securities and Markets Authority (“ESMA”) opened a public consultation on draft guidelines under the Market Abuse Regulation (“MAR”).

ESMA is consulting on its proposed non-exhaustive indicative list of information expected or required to be published on commodity derivatives markets or spot markets for the purposes of determining inside information regarding commodity derivatives and of triggering the prohibitions for insider dealing.

Under MAR, inside information in relation to commodity derivatives must relate to either the commodity derivatives themselves or to the related spot commodity contract. However there is a wide variety of commodities markets and commodity derivatives markets which may require distinguishing between types of information specific to these markets. ESMA is giving further consideration to the scope of the instruments or products concerned.

ESMA will consider all comments received by May 20. Consultation Paper.

European Commission Adopts Delegated Regulation on Presentation of Investment Recommendations and Disclosure of Conflict of Interest Under MAR

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The European Commission has adopted a Delegated Regulation supplementing the Market Abuse Regulation (“MAR“) with regard to regulatory technical standards for the technical arrangements for the objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflict of interest (under Article 20).

The Delegated Regulation provides for rules on the identity of producers of recommendation; introduces a general standard on objective presentation of recommendations, applicable to any person mentioned in Article 20(1); sets out requirements on the maintenance of records of all recommendations produced on any issuer or financial instrument and disseminated during the preceding 12-month period and determines the general standards and additional obligations relating to disclosure of interests or of conflicts of interest. It also ensures that recommendations include the date and time on which the recommendation was first disseminated and provides for specific arrangements for dissemination of recommendations, their summary or extract and when recommendations are substantially altered.

Once approved by the Council of the EU and the European Parliament, it is expected that the Delegated Regulation will apply from July 3, 2016. The Delegated Regulation can be found here.

Delegated Regulation Adopted Under Market Abuse Regulation

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On February 26, the European Commission adopted a Delegated Regulation supplementing the Market Abuse Regulation (No. 596/2014) (“MAR“) laying down regulatory technical standards on accepted market practice.

MAR defines “accepted market practice” as a specific market practice that is accepted by a competent authority of a member state (Article 3(1) MAR). ESMA is required to develop draft regulatory technical standards specifying the criteria, procedure and requirements for establishing an accepted market practice and the requirements for maintaining or terminating it or modifying the conditions for its acceptance. The Delegated Regulation provides for a list of “supervised persons” for the purposes of the Delegated Regulation, and lays down requirements for establishing an accepted market practice.

The Council of the EU and European Parliament are expected to review and consider the Delegated Regulation. Provided there are no objections the Delegated Regulation will apply from July 2, 2016.

ECON Publishes Reports Postponing Application of MiFID II, MiFIR, MAR and CSDR

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The European Parliament’s Committee on Economic and Monetary Affairs (“ECON“) has published two draft reports on the proposed directive postponing application of the MiFID II Directive, the proposed regulation amending the Markets in Financial Instruments Regulation (“MiFIR“), the Market Abuse Regulation (“MAR“) and the Regulation on improving securities settlement and regulating central securities depositories (“CSDR“) as regards certain dates.

Both reports contain an explanatory statement, which expresses disappointment that, due to the failure of ESMA and the Commission to deliver regulatory technical standards and delegated acts by the deadline set out in the legislation, and to launch the necessary procurement procedures in time, MiFID II will not be applicable as initially scheduled on January 3, 2017. The rapporteur acknowledged that the delay of the application by a year to January 2018 was sensible and justified, given the scale of the tasks yet to be completed before implementation.

The reports can be found here and here.

Commission Extends by One Year the Application Date for the MiFID II Package

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On February 10, the European Commission published a press release announcing it is proposing a one year extension to the application date of the MiFID II legislative package (that is, the MiFID II Directive (2014/65/EU) and the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR).

To implement its proposal, the Commission has published:

  • A legislative proposal for a Directive amending the MiFID II Directive as regards certain dates.
  • A legislative proposal for a Regulation amending MiFIR, the Market Abuse Regulation (Regulation 596/2014) (MAR) and the Regulation on improving securities settlement and regulating central securities depositories (CSDs) (Regulation 909/2014) (CSDR) as regards certain dates.

Member states must transpose the MiFID II Directive by July 3, 2016. Both the MiFID II Directive and MiFIR are scheduled to apply from January 3, 2017. Under the Commission’s proposal, national competent authorities (NCAs) and market participants will have an additional year to comply with MiFID II. The proposed new application date is January 3, 2018.

The Commission is proposing the application date extension as a result of the complex technical data infrastructure that needs to be established so that MiFID II can operate effectively. As a result of significant challenges in collecting the data that is needed, ESMA informed the Commission in October 2015 that neither NCAs nor market participants will have the necessary systems ready by January 3, 2017. As a result, ESMA has concluded that a delay is unavoidable.

In the light of these exceptional circumstances, and to avoid legal uncertainty and potential market disruption, the Commission considers an extension of the MiFID II application date is necessary.

ESMA Publishes Responses to Consultations on MAR

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On October 17, the European Securities and Markets Authority (ESMA) published responses that it received to consultations published in July 2014 relating to the Market Abuse Regulation (Regulation 596/2014) (MAR) on: (i) draft technical advice on possible delegated acts concerning MAR; and (ii) draft regulatory technical standards (RTS) and implementing technical standards (ITS) on MAR.  Response.