The European Securities and Markets Authority issued its final technical advice and initiated a consultation regarding proposed regulatory and technical standards regarding the roll-out of the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).
Among other matters, ESMA proposes: (1) pre- and post-trade transparency requirements for equity and equity-like financial instruments by trading venues and investment firms; (2) enhanced transparency regarding non-equity instruments, particularly bonds, derivatives, structured finance products and emission allowances; (3) trading of derivatives only on certain venues in line with G20 requirements such as on regulated markets and multilateral or organized trading facilities; (4) position limits and reporting requirements for commodity derivatives; (5) rules impacting algorithmic and high-frequency trading, including definitions and organizational requirements; and (6) non-discriminatory access requirements to trading venues, clearinghouses and benchmarks.
ESMA’s technical advice also has a number of provisions aimed at enhancing customer protection. These include provisions related to when portfolio managers can receive research from third parties; when investment firms can receive or pay inducements; and disclosure of costs and charges.
ESMA also proposes that investment firms “establish and maintain a permanent and effective compliance function that operates independently” and has certain enumerated responsibilities. These tasks include assessing on a “regular basis” a firm’s compliance with its MiFID obligations; assisting staff providing investment services to comply with the firm’s MiFID II obligations; reporting at least annually to the firm’s management body regarding the “implementation and effectiveness of the overall control environment for investment services and activities,” among other matters; and to monitor the firm’s complaints handling process.
Firms are also required to appoint a “single officer” responsible for matters related to the safeguarding of client assets, although this person may have other responsibilities.
The technical advice will now be sent to the European Commission for approval, while comments will be accepted by ESMA on its consultation through March 2, 2015. MiFID II and MiFIR are scheduled to go into effect on January 3, 2017.