Registration, reporting and liability for derivatives transactions in Spain

Liability and enforcement

What is the territorial scope of the laws and regulations governing listed, cleared and uncleared equity derivatives transactions?

The regulations on short selling and reporting to the CNMV with respect to shareholders’ stakes and the Market Abuse Regulation described throughout this chapter apply to any counterparty of an OTC equity derivative transaction and therefore must be observed, even if one counterparty or neither counterparty is subject to Spanish jurisdiction. As stated, certain additional reporting obligations apply to credit institutions and financial services providers operating in the Spanish markets. EMIR reporting obligations may also affect counterparties from non-EU countries, so the clearance and reporting obligations would also apply.

What registration or authorisation requirements apply to market participants that deal or invest in equity derivatives, and what are the implications of registration?

The entities mentioned in section 3 article 69 of the Securities Market Law that fulfil the requisites established in the Rule Book and the relevant circulars may become members of the MEFF Exchange.

An application to become an Exchange member must be accompanied by a certificate issued either by the CNMV or by the Bank of Spain, as appropriate to the type of entity involved. This certificate will confirm the entity’s compliance with the conditions laid out in the Securities Markets Law.

Membership applications shall be approved by the MEFF Exchange board of directors. To acquire such a condition, members must apply in writing to MEFF Exchange and execute the agreements with it.

Members must have, and maintain, the necessary technical and human resources that may be required to trade on the MEFF Exchange. Such requirements are established and reviewed by the MEFF Exchange by its own rules and circulars.

Exchange members shall be members of the CCP in which the contracts admitted to trading on the MEFF Exchange are settled, cleared and being the object of a CCP.

What reporting requirements apply to market participants that deal or invest in equity derivatives?

Trading information shall be disclosed by the MEFF Exchange as follows:

• In real time:
• through its proprietary information systems; and
• through professional broadcasters of financial information.
• Regularly, in the Daily Bulletin: the following information, at least, in connection with the trading of each contract series shall be disseminated in real time:
• the best offered buy and sell price;
• the number of contracts offered for such prices;
• the price of the last transaction performed on the trading system;
• the cumulative number of contracts traded during the session up to a particular time at any price; and
• other information determined pursuant to the General Conditions of the Contracts as required to be broadcast in real time.

What legal issues arise in the design and issuance of structured products linked to an unaffiliated third party’s shares or to a basket or index of third-party shares? What additional disclosure and other legal issues arise if the structured product is linked to a proprietary index?

For listing of securities in SIBE, as detailed in question 20, a prospectus must be produced by the issuer of the OTC product and registered at the CNMV, following the content of Regulation (EC) No. 809/2004. Owing to the existence of public information about the underlying issuer of the shares, the prospectus needs to provide limited information about the issuer and will refer to the public information available at the CNMV or on the issuer’s website. As in other European jurisdictions, the prospectus must provide a detailed description of the product and how the basket or index works. In addition, the information about the seller or issuer of the OTC must be detailed, including the potential conflict of interest and cost related to the transaction. The prospectus must also detail the general tax regime applicable to the products, although an additional tax analysis may be required depending on the jurisdiction of the subscriber of the product.

Describe the liability regime related to the issuance of structured products.

In addition to general contractual liability and the Market Abuse Regulation, issuers, offerers and others (and the directors of the aforementioned) involved in offerings of structured products face potential liability for the content, misstatements or omissions of a prospectus, as well as for failing to register the required prospectus at the CNMV, in accordance with the Securities Market Law and article 32 et seq of Royal Decree 1310/2005 of 4 November 2005, implementing that Law.

What registration, disclosure, tax and other legal issues arise when an issuer sells a security that is convertible for shares of the same issuer?

Convertible securities of Spanish companies require the prior authorisation of the general shareholders’ meeting and the issuance of certain reports by the board of directors and an independent expert appointed by the applicable Spanish mercantile registry, in accordance with the Corporations Law. An additional report on the exclusion of the shareholders’ right to subscribe such securities may also be required. In addition, the same prospectus regulation that applies for offering and listing such securities will also apply to their sale and therefore the Securities Market Law, Regulation (EC) No. 809/2004 and Royal Decree 1310/2005 must be considered. In practice, many convertible securities of Spanish issuers are listed on non-regulated markets to avoid these disclosure obligations, which can delay the schedule of the transactions.

What registration, disclosure, tax and other legal issues arise when an issuer sells a security that is exchangeable for shares of a third party? Does it matter whether the third party is an affiliate of the issuer?

Exchangeable securities differ from convertible securities in that the issuer of the underlying security is not the issuer of the exchangeable security or, if it is the issuer, such underlying security was already issued before the issuance of the exchangeable security (and the issuer had repurchased them, for example). In these circumstances, the reports required by the Corporations Law for convertible securities are not necessary. Notwithstanding, the same prospectus regulation that applies for offering and listing such securities will also apply to their sale and therefore the Securities Market Law, Regulation (EC) No. 809/2004 and Royal Decree 1310/2005 must be considered. In practice, many exchangeable securities of Spanish issuers are listed on non-regulated markets to avoid these disclosure obligations, which can delay the schedule of the transactions.