As reported in the April and May issues of our Funds e-zine, the European Parliament and Council have adopted the MiFID II proposals.

On 12 June 2014, both texts were published in the Official Journal and accordingly will come into force on 2 July 2014, applying from January 2017. The publication comes after more than two and a half years of negotiation and consultation to, in part, strengthen investor protection and provide for a more transparent system.

ESMA Consultation on implementing measures

The texts are “level 1” of the Lamfalussy process and thus are high level rules. The European Commission will engage with other bodies in relation to introducing more detailed “level 2” rules over the next 18 months. In that regard, the European Securities and Markets Authority (ESMA) is expected to produce a number of regulatory technical standards, implementing technical standards, various recommendations, guidelines and other technical advices and have already begun this process with the publication of both a Discussion Paper and a Consultation Paper on the possible content of the delegated acts. The deadline for responses is 1 August 2014. In advance of the deadline, ESMA will host three public hearings in relation to secondary markets, investor protection and commodity derivatives which are scheduled for 7 and 8 July 2014.

Key topics covered in the consultation include:

  • Investor protection
  • Transparency
  • Data publication
  • Micro-structural issues (algorithmic and high frequency trading)
  • Requirements regarding trading venues
  • Commodity derivatives
  • Portfolio compression

Request for technical advice from the EBA

The European Commission has also requested technical advice from the European Banking Authority (EBA) on possible delegated acts concerning product intervention by competent authorities. Under MiFIR, the Commission is empowered to adopt delegated acts specifying criteria and factors to be taken into account by ESMA, ЕВА and competent authorities in determining when there is a significant investor protection concern and threat to the orderly functioning and integrity of financial or commodity markets. The Commission has already requested advice from ESMA in this regard and as MiFIR establishes an identical framework for EBA intervention powers in respect of structured deposits, the Commission has asked that ESMA and the EBA work together when providing technical advice to the Commission so that the factors and criteria to be taken into account for the exercise of product intervention powers for structured deposits should be similar to (if not identical to) those set for ESMA with respect to financial instruments. The EBA has been requested to provide its technical advice within 6 months of MiFID II coming into force.

Stuart Connolly