MiFIR

ESMA Publishes Final Report on Frequent Batch Auctions for Equity Instruments Under MIFID II

On June 11, the European Securities and Markets Authority (ESMA) published its final report (ESMA70-156-1035) following a call for evidence on frequent batch auctions, a type of periodic auction trading system for equity instruments under the MiFID II Directive (2014/65/EU) and the Markets in Financial Instruments Regulation (600/2014) (MiFIR). READ MORE

ESMA Updates MiFID II Transitional Transparency Calculations for Electricity Derivatives

 

On January 22, the European Securities and Markets Authority (“ESMA“) published an updated version of its transitional transparency calculations (“TTC“) required under the MiFID II Directive (2014/65/EU) and the Markets in Financial Instruments Regulation (600/2014) (“MiFIR“).

The update relates to the TTC for commodity derivatives and affects only electricity derivatives.

Further information is contained in section E10 of ESMA’s frequently asked questions (“FAQ“) (ESMA50-164-677) on the TTC, which explains why the last TTC results for commodity derivatives, published on December 6, 2017, have been modified.

The transparency calculations can be found here and the FAQs, which were published on ESMA’s website, can be found here.

Council of the EU Publishes Notes on Proposed Regulation and Directive for Supervision Investment Firms

 

On January 4, the Council of the EU published the following notes from the Council Presidency to its Permanent Representatives Committee (“COREPER“) relating to the European Commission’s proposed Regulation and Directive establishing a new framework for prudential requirements for investment firms:

  • A note (5022/19) setting out the Presidency compromise proposal on the proposed Directive on the prudential supervision of investment firms and amending the CRD IV Directive (2013/36/EU) and the MiFID II Directive (2014/65/EU) (2017/0364 (COD)) (the proposed Investment Firms Directive (“IFD“)).
  • A note (5021/19) setting out the Presidency compromise proposal on the proposed Regulation on the prudential requirements of investment firms and amending the Capital Requirements Regulation (Regulation 575/2013) (“CRR“), the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) and the EBA Regulation (Regulation 1093/2010) (2017/0358 (COD)) (the proposed Investment Firms Regulation).

The previous compromise proposals were published in October 2018. The notes do not explain the changes that have been made in the latest revised versions. However, it appears that new text is marked in underlined bold and deletions are indicated in strikethrough.

ESMA Further Extends the Prohibition on Binary Options

 

European Securities and Markets Authority (“ESMA“) published a press release on November 9 stating that it has agreed to renew the prohibition of the marketing, distribution or sale of binary options to retail clients for a further three-month period from January 2, 2019.

ESMA published a decision notice on the prohibition in June, which has been in effect since July 2. In August, ESMA announced that it would extend the prohibition from October 2 for a further three-month period.

ESMA is extending the prohibition again as it considers that a significant investor protection concern related to the offer of binary options to retail clients continues to exist. The measure will be renewed on the same terms as the previous renewal decision.

ESMA intends to adopt the renewal measure in the coming weeks, following which it will publish an official notice on its website. The measure will then be published in the Official Journal of the EU.

Under the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“), ESMA can only introduce temporary intervention measures for a three-month period, following which the measures must be renewed or they automatically expire.

ESMA Publishes two Decisions on MiFID II Assessments of Third Country Trading Venues

 

ESMA published the two decisions of its board of supervisors on October 11 (both dated September 26, 2018). The following decisions were made on the delegation to the ESMA chair of assessments of third-country trading venues and related to:

  • A decision on the assessment for the purposes of Articles 20 and 21 of the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) (ESMA70-155-5775).
  • A decision on the assessment for the purposes of Article 57(4) of the MiFID II Directive (2014/65/EU) (ESMA70-155-5905).

The decisions were regarding the treatment of transactions executed by EU investment firms on third-country trading venues, for post-trade transparency under MiFIR, and the treatment of positions held in contracts traded on those venues for the position limit regime under the MiFID II Directive. ESMA published opinions in December 2017 specifying that, subject to third-country trading venues meeting a set of criteria, investment firms trading on those trading venues are not required to make transactions public in the EU via an approved publication arrangement (“APA“).

In the decisions, the board of supervisors delegates responsibility for non-controversial assessments of third-country trading venues for these purposes to the ESMA chair. The decisions specify the criteria that the chair will use when assessing whether to consider a third-country entity as a trading venue for the purposes of Articles 20 and 21 of MiFIR or Article 57(4) of the MiFID II Directive. The board of supervisors retains its powers to perform controversial assessments of third-country trading venues.

ESMA Updates MiFIR Data Reporting Q&As

 

The European Securities and Markets Authority (“ESMA“) published an updated version on November 14, 2017, of its Q&As on data reporting under the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“).

The updated version includes new answers (in section 15: transaction reporting) relating to:

  • Portfolio management
  • Swaps related to indices
  • Transaction reporting for primary issuances
  • Corporate events

ESMA Q&A on Trading Obligation for Shares Under MiFID II

 

The European Securities and Markets Authority (“ESMA“) published a press release on November 13, 2017 clarifying the application of the trading obligation for shares to trade certain instruments on-venue under the MiFID II Directive (2014/65/EU).

The press release contains a Q&A about the scope of the trading obligation where there is a chain of transmission of orders. ESMA explains that Article 23(1) of the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) determines the scope of the trading obligation for shares admitted to trading on a regulated market or traded on a trading venue by requiring investment firms to ensure that trades they undertake in shares take place on a regulated market systematic internalizer, multilateral trading facility (MTF), or equivalent third-country venue.

Where there is a chain of transmission of orders concerning those shares, all EU investment firms that are part of the chain should ensure that the ultimate execution of the orders complies with the requirements under Article 23(1) of MiFIR.

The European Commission is preparing equivalence decisions for non-EU jurisdictions whose shares are traded systematically and frequently in the EU. However, the absence of an equivalence decision relating to a particular venue indicates that the Commission currently has no evidence that the EU trading in shares admitted to trading in that third country’s regulated markets can be considered as systematic, regular and frequent.

Delegated Acts Under the MiFID II Directive (2014/65/Eu) Published in OJ

 

On March 31, 2017, 28 Delegated Regulations supplementing the Markets In Financial Instruments Directive (“MiFID II“) (2014/65/Eu) and the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) were published in the OJ, together with a Delegated Directive supplementing the MiFID. The Delegated Regulations will enter into force 20 days after their publication in the OJ (that is, April 20, 2017). They will apply from January 3, 2018, with the exception of certain provisions in Delegated Regulations 2017/567, 2017/571, 2017/581, 2017/583, 2017/587, 2017/588 and 2017/590.

The Delegated Regulations are:

  1. Commission Delegated Regulation (EU) 2017/565 of April 25, 2016, supplementing MiFID II with regard to organizational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive;
  2. Commission Delegated Regulation (EU) 2017/566 of May 18, 2016, supplementing MiFID II with regard to regulatory technical standards (“RTS“) for the ratio of unexecuted orders to transactions in order to prevent disorderly trading conditions;
  3. Commission Delegated Regulation (EU) 2017/567 of May 18, 2016, supplementing MiFIR with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions;
  4. Commission Delegated Regulation (EU) 2017/568 of May 24, 2016, supplementing MiFID II with regard to RTS for the admission of financial instruments to trading on regulated markets;
  5. Commission Delegated Regulation (EU) 2017/569 of May 24, 2016, supplementing MiFID II with regard to RTS for the suspension and removal of financial instruments from trading;
  6. Commission Delegated Regulation (EU) 2017/570 of May 26, 2016, supplementing MiFID II on markets in financial instruments with regard to RTS for the determination of a material market in terms of liquidity in relation to notifications of a temporary halt in trading;
  7. Commission Delegated Regulation (EU) 2017/571 of June 2, 2016, supplementing MiFID II with regard to RTS on the authorization, organizational requirements and the publication of transactions for data reporting services providers;
  8. Commission Delegated Regulation (EU) 2017/572 of June 2, 2016, supplementing MiFIR with regard to RTS on the specification of the offering of pre- and post-trade data and the level of disaggregation of data;
  9. Commission Delegated Regulation (EU) 2017/573 of June 6, 2016, supplementing MiFID II on markets in financial instruments with regard to RTS on requirements to ensure fair and nondiscriminatory co‑location services and fee structures;
  10. Commission Delegated Regulation (EU) 2017/574 of June 7, 2016, supplementing MiFID II with regard to RTS for the level of accuracy of business clocks;
  11. Commission Delegated Regulation (EU) 2017/575 of June 8, 2016, supplementing MiFID II on markets in financial instruments with regard to RTS concerning the data to be published by execution venues on the quality of execution of transactions;
  12. Commission Delegated Regulation (EU) 2017/576 of June 8, 2016, supplementing MiFID II with regard to RTS for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution;
  13. Commission Delegated Regulation (EU) 2017/577 of June 13, 2016, supplementing MiFIR on markets in financial instruments with regard to RTS on the volume cap mechanism and the provision of information for the purposes of transparency and other calculations;
  14. Commission Delegated Regulation (EU) 2017/578 of June 13, 2016, supplementing MiFID II on markets in financial instruments with regard to RTS specifying the requirements on market making agreements and schemes;
  15. Commission Delegated Regulation (EU) 2017/579 of June 13, 2016, supplementing MiFIR on markets in financial instruments with regard to RTS on the direct, substantial and foreseeable effect of derivative contracts within the Union and the prevention of the evasion of rules and obligations;
  16. Commission Delegated Regulation (EU) 2017/580 of June 24, 2016, supplementing MiFIR with regard to RTS for the maintenance of relevant data relating to orders in financial instruments;
  17. Commission Delegated Regulation (EU) 2017/581 of June 24, 2016, supplementing MiFIR with regard to RTS on clearing access in respect of trading venues and central counterparties;
  18. Commission Delegated Regulation (EU) 2017/582 of June 29, 2016, supplementing MiFIR with regard to RTS specifying the obligation to clear derivatives traded on regulated markets and timing of acceptance for clearing;
  19. Commission Delegated Regulation (EU) 2017/583 of July 14, 2016, supplementing MiFIR on markets in financial instruments with regard to RTS on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives;
  20. Commission Delegated Regulation (EU) 2017/584 of July 14, 2016, supplementing MiFID II with regard to RTS specifying organizational requirements of trading venues;
  21. Commission Delegated Regulation (EU) 2017/585 of July 14, 2016, supplementing MiFIR with regard to RTS for the data standards and formats for financial instrument reference data and technical measures in relation to arrangements to be made by ESMA and competent authorities;
  22. Commission Delegated Regulation (EU) 2017/586 of July 14, 2016, supplementing MiFID II with regard to RTS for the exchange of information between competent authorities when cooperating in supervisory activities, on-the-spot verifications, and investigations;
  23. Commission Delegated Regulation (EU) 2017/587 of July 14, 2016, supplementing MiFIR on markets in financial instruments with regard to RTS on transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internalizer;
  24. Commission Delegated Regulation (EU) 2017/588 of July 14, 2016, supplementing MiFID II with regard to RTS on the tick size regime for shares, depositary receipts, and exchange-traded funds;
  25. Commission Delegated Regulation (EU) 2017/589 of July 19, 2016, supplementing MiFID II with regard to RTS specifying the organizational requirements of investment firms engaged in algorithmic trading;
  26. Commission Delegated Regulation (EU) 2017/590 of July 28, 2016, supplementing MiFIR with regard to RTS for the reporting of transactions to competent authorities;
  27. Commission Delegated Regulation (EU) 2017/591 of December 1, 2016, supplementing MiFID II with regard to RTS for the application of position limits to commodity derivatives; and

Commission Delegated Regulation (EU) 2017/592 of December 1, 2016, supplementing MiFID II with regard to RTS for the criteria to establish when an activity is considered to be ancillary to the main business.