The Market Abuse Regulation (MAR) provides a harmonised framework for the prohibition of market manipulation. This encompasses a prohibition on entering into a transaction, placing an order to trade or engaging in behaviour which gives, or is likely to give, a false or misleading signal as to the supply of, demand for, or price of, an instrument within the scope of MAR, or which secures, or is likely to secure, the price of such an instrument at an abnormal or artificial level. However, MAR also provides an exception to the general prohibition of market manipulation.
To benefit from that exception, the concerned person needs to establish that the transaction conducted, the order placed or the behaviour engaged in was carried out for legitimate reasons and in accordance with a market practice formally established by a Member State national competent authority (NCA), referred to as accepted market practice (AMP).
Under MAR, the NCA intending to establish an AMP must notify the European Securities and Markets Authority (ESMA) and other NCAs of its intention and ESMA has to issue an opinion on the intended AMP within 2 months from the receipt of the notification.
During the summer of 2016, four NCAs notified ESMA of their AMPs relating to liquidity contracts or agreements established under the regime stemming from the now repealed Market Abuse Directive (MAD). Another NCA notified ESMA of its intention to establish an AMP to replace the existing AMP on liquidity contracts previously established under MAD.
ESMA has now adopted an opinion in order to convey common criteria that liquidity contract AMPs should have in order to ensure a more consistent and convergent approach to the establishment of AMPs on liquidity contracts across Europe and to ensure transparency on the agreed points of convergence. The opinion should be considered by NCAs when establishing such AMPs.