ESMA published its final technical standards (TS) on some of the most important pieces of post-crisis financial regulation: the Markets in Financial Instruments Directive (MiFID II), the Market Abuse Regulation (MAR) and the Central Securities Depositaries Regulation (CSDR). The new technical standards will alter the functioning of European financial markets by increasing their transparency, safety and resilience as well as investor protection.
MiFID II to increase market transparency, efficiency and safety
The rules ESMA is delivering on MiFID II will bring the majority of non-equity products into a robust regulatory regime and move a significant part of OTC trading onto regulated platforms. The key rules introduce:
- Fairer, safer and more efficient markets (including tests on non-financial firms' investment activities, rule governing high frequency trading, and ranges for the new EU-wide commodity derivatives position limits regime)
- Greater transparency (including thresholds for the pre- and post-trade transparency regimes extended to equity-like instruments, bonds, derivatives, structured finance products and emission allowances, a newly introduced liquidity assessment for non-equity instruments, and new trading obligation for shares and certain derivatives to be traded only on regulated platforms and, in the case of shares, and reporting requirements for commodity derivatives).
- Stronger investor protection (including improved disclosure to strengthen the best execution regime).
MAR to increase market integrity and investor protection
ESMA’s MAR TS will strengthen the existing market abuse framework by extending its scope to new markets, platforms and behaviours. They contain prohibitions for insider dealing and market manipulation, and provisions to prevent and detect these.
CSDR to harmonise functioning of European central securities depositories
The CSD Regulation harmonises the authorisation and supervision of central securities depositories (CSDs) within the EU. It provides organisational, conduct of business and prudential requirements to ensure CSDs are safe, efficient and sound. It also introduces a settlement discipline regime, including measures to prevent and address settlement fails, such as a mandatory buy-in and cash penalties as well as reporting requirements for internalised settlement. ESMA’s TS, which translate CSDR provisions into applicable rules, cover harmonised CSD requirements, and internalised settlement reporting.
ESMA’s different sets of final draft TS have been sent for endorsement to the European Commission. The Commission now has three months to approve these. Once endorsed, both the European Parliament and the Council have an objection period. After CSDR, which entered into force back in 2014, MAR and MiFID II will enter into force in 2016 and 2017 respectively.