Stephen Maijoor has spoken to EP’s Economic and Monetary Affairs Committee (ECON) on ESMA’s ongoing work on the revised Markets in Financial Instruments Directive (MiFID 2). He focused on three critical parts of the RTS it delivered at the end of September:

  • non-equity transparency: he said ESMA had taken account of consultation responses and had adopted the instrument-by-instrument approach to determine whether a bond is liquid. He stressed the complexity of these products and said the implementation phase is crucial, and will include performing liquidity assessments and setting the thresholds for transactions across asset classes and having them in place in time for market participants to adjust their systems;
  • position limits: ESMA has adjusted the range of limits that can be set to 5% to 35% taking into consideration concerns by ECON. He stressed again that ESMA has had to establish a broad range as this regime has to accommodate a wider range of contracts than any other market, so some will regard the approach as too strict and others as not strict enough. National regulators should set strict limits where they are needed; and
  • ancillary activity: ESMA recognises the difficulties of setting the test on what is an appropriate gauge of ancillary activity. Its ultimate view was that there were insurmountable technical weaknesses to a test based on capital calculations, so it took what it hopes is the best workable approach. Mr Maijoor commented that many of the people now calling for a capital test are the same ones who criticised the original proposals.

Finally, he looked at the implementation timetable and said ESMA has raised with the Commission the significant difficulties in meeting the proposed timetable to enable firms to comply with MiFID 2 by 3 January 2017, and has suggested to the Commission it may need to make legislative measures to delay application of some requirements. (Source: ESMA Speaks on MiFID 2)