In anticipation of the application of the new MiFID II regime on 3 January 2017, the European Securities and Markets Authority (ESMA) has published draft regulations on authorisation, passporting and registration of third-country investment firms, namely Singaporean, Swiss, American and other firms from outside the EU. These regulations set out the information such firms must provide when applying to ESMA for registration and how they communicate their regulatory status to their EU clients.
Under the Markets in Financial Instruments Regulation (MiFIR), third-country firms without an EU branch will be able to provide investment services and perform investment activities, and ancillary activities, to non-retail clients and counterparties only if they are first registered with ESMA.
Registration will be possible only if the European Commission has decided that the third country’s prudential and business conduct framework have equivalent effect to the EU’s and co-operation arrangements have been established between ESMA and the third-country regulator. Until then, the provision of services by third-country firms in the EU remains subject to member states’ national regimes. Where those regimes are restrictive, third-country firms may encounter barriers to solicitation and business unless they fall within MiFID II exemptions: as has been widely publicised, the exemptions available to commodity firms will, controversially, be much more limited than before at the same time as many physical contracts being reclassified as derivatives for regulatory purposes. Many energy and commodity traders based outside the EU do not realise that when dealing with EU counterparties, they may already be relying on the broader exemptions under the existing MiFID regime.