ESMA has published a protocol on the operation of notifications under Article 41 of MiFID, ensuring effective cooperation between the competent authorities of Member States.  The protocol aims to afford investors across all Member States the same level of protection regardless of where they trade.

Article 41(1) of MiFID gives operators of regulated markets the power to suspend or remove from trading a financial instrument which no longer complies with the rules of that regulated market, unless such a step would be likely to cause significant damage to the investor’s interests or the orderly functioning of that regulated market.

The operator must make public its decision and communicate the relevant information to its competent authority. The competent authority is obliged to inform the competent authority of each other Member State however, there is no obligation on the other competent authorities to follow its decision.

Article 41(2) gives a competent authority the power to suspend or remove financial instruments from trading. The competent authority must immediately make its decision public and inform ESMA and all other competent authorities.  All other competent authorities are obliged to take similar action, unless it would be likely to cause significant damage to the interests of the investors or the orderly functioning of the financial markets.

Due to varying national laws and regulations, there is no uniformity across Member States on the decisions to suspend or remove financial instruments from trade. This protocol hopes to address some of the inconsistencies, by expressly listing categories of events which are definitively covered by Article 41. The list is not exhaustive and will be kept under review in light of the practical experiences and the evolution of financial regulations.

The protocol addresses the scope of notifications, the timing of notifications and the method of processing such notifications.  To this end, ESMA has developed SARIS (suspension and restoration information system), an IT system which enables all notifications to be shared or published between competent authorities.  Until SARIS goes live, which is expected towards the end of this year, competent authorities must continue to use email notifications.

While Article 41 of MiFID primarily deals with suspension and removal of instruments from trading, the protocol ensures that competent authorities also notify restorations of trading of financial instruments as soon as practicably possible.