EUROPEAN UNION: ESMA publishes implementing rules for MiFID II

Friday December 19 2014

The European Securities and Markets Authority (ESMA) has published technical advice (TA) and has released a consultation on draft regulatory technical and implementing standards (RTS/ ITS) regarding the implementation of Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

The following issues have been identified as a result of the ESMA’s TA/ draft RTSL:

• Increased trade transparency for non-equity instruments;
• A trading obligation for shares and a double volume cap mechanism for shares and equity-like instruments;
• An obligation to trade derivatives on MiFID venues;
• Newly introduced position limits and reporting requirements for commodity derivatives;
• Rules governing high frequency trading, imposing a strict set of organisational
• Requirements on investment firms and trading venues;
• Provisions regulating access to central counterparties (CCPs), trading venues and
• Benchmarks, designed to increase competition in the Union; and
• Requirements for a consolidated tape of trading data.

ESMA’s TA has proposed the following issues with regard to investor protection:

• Clarifications about the circumstances in which portfolio managers can receive research from third parties;
• Clarifications under which circumstances inducements meet the quality enhancement requirement for the provision of advice;
• Requirements for investment firms manufacturing and/or distributing financial instruments and structured deposits to have product governance arrangements in place in order to assess the robustness of their manufacture and/or distribution;
• Requirements for firms to provide clients with details of all costs and charges related to their investment, including cost aggregations, the timing of disclosure (ex-ante and ex-post); information to non-retail clients; the scope of firms subject to this obligation;
• Information on the cumulative effect of costs on the return;
• Organisational requirements for firms providing investments advice on an independent basis; and
• Specification of powers for ESMA and national regulators with regards to prohibiting or restricting the marketing and distribution of financial instruments.

ESMA’s TA has now been finalised and will be sent to the European Commission (EC). ESMA’s draft RTS/ ITS remain open for consultation until 2nd March 2015. ESMA will have finalised its draft RTS and draft ITS by mid-2015 and January 2016 respectively.
ESMA has additionally stated that MiFID II/ MiFIR and its implementation measures will be applicable from 3rd January 2017.

Please click on the above link for further details.