The European Securities and Markets Authority (ESMA) has published a peer review report on compliance with the Short Selling Regulation (SSR) in the context of market making activities. The aim of the review was to assess how national competent authorities (NCAs) apply the exemption for the market making activities in Article 17 of the SSR, identify good practices and inform future discussions on the upcoming European Commission review of the SRR. The review mainly focused on the markets with the highest number of market makers benefitting from the exemption, and the markets in which market makers have notified the highest number of instruments. Among other things, the review found that:

  • all NCAs have dedicated resources, processes and are staffed to handle notifications;
  • there is significant diversity regarding the scrutiny of notifications and firms;
  • NCAs are not properly seeking advance assurance of market makers’ compliance with organisational requirements to use existing exemptions;
  • some NCAs are applying a “per firm” approach to processing notifications for exemptions rather than a review of the notifications instrument by instrument as required by the relevant ESMA Guidelines; and
  • some NCAs place an overreliance on monitoring by trading venues of market makers’ compliance with the rules and procedures of those trading venues.

ESMA has submitted the peer review report to the European Commission for its consideration and expects it to clarify what the correct interpretation of the SSR should be, and possibly to streamline the definition of market making as part of its upcoming review of the SSR.

View ESMA assesses regulators’ compliance with market maker exemption under Short Selling Regulation, 5 January 2016