On 3 and 4 December 2020, the European Parliament (Parliament), the Council and the European Commission (Commission) held the first round of the trilogue negotiations on the July 2020 Capital Markets Recovery Package proposal for targeted amendments to MiFID II (the so called MiFID “quick fix” proposal, overview of which is included in our blog note). While this first round of political discussions did not result in a final agreement, follow up feedback suggests that a deal in nonetheless in sight. Some of the main points discussed included:

  • Ancillary activity exemption: In what appears to be the most contentious point of the ongoing negotiations, a divergence of positions remains between the Commission and the Council on one side, and the Parliament on the other. While the Council supports the Commission’s proposal to simplify the test by removing the quantitative criteria and focus the test on qualitative criteria – in particular in the light of the UK departure from the EU – the Parliament proposes to make the qualitative criteria optional. The Commission is expected to suggest a compromise solution before the next round of negotiations.
  • Position limits for commodity derivatives: With the provisions amending the scope of the position limits regime being the key political item for the Parliament in the ongoing review, there appears to be still some divergence of positions between the legislators regarding the scope of contracts subject to the regime. With the Parliament’s negotiators voicing reluctance towards further reduction thereof in respect of agricultural commodity derivatives in particular, the Commission is expected to try and propose a compromise solution before the next round of political discussions.
  • Investor protection issues: A divergence of positions between the Parliament and the Council appears to remain on the proposed Council amendment regarding proposed exemptions from certain product governance requirements applicable to investment firms manufacturing financial instruments. In respect of payment for research, the Council turned out to be supportive towards the Parliament’s proposal to move the relevant requirements regarding joint payments for SME research from Level 2 to Level 1.

The next round of negotiations is scheduled for Wednesday, 9 December 2020 and if this round also fails to deliver a final agreement, there will be another meeting scheduled the following week. However, even if the negotiators reach agreement this week, it might be not enough time to get the final text formally approved by the Parliament in the last plenary session of 2020, which starts on 14 December. In that case, formal approval and publication of the final legislative text in the EU Official Journal will take place in early 2021. After that, Member States will have 12 months to transpose the provisions of the “quick fix” to national legal frameworks.