Background

The Markets in Financial Instruments Directive (recast) (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR) were published in the Official Journal of the EU on 12 June 2014 and entered into force 20 days later (2 July 2014).

Following the finalisation of MiFID II and MiFIR the European Securities and Markets Authority (ESMA) has been working on the implementing measures that will add further detail to the Directive and Regulation.

On 23 April 2014, ESMA received a formal request from the European Commission (the Commission) to provide technical advice to assist the Commission on the possible content of the delegated acts. ESMA was required to provide such technical advice by no later than six months after the entry into force of MiFID II and MiFIR.

MiFID II and MiFIR also require ESMA to develop draft regulatory technical standards (RTS) and implementing technical standards (ITS) in several areas for submission to the Commission by, respectively, 12 and 18 months from entry into force of the Directive and the Regulation.

On 22 May 2014, ESMA published a consultation paper setting out its proposed advice to the Commission regarding the delegated acts. At the same time ESMA also published a discussion paper that set out its initial thinking on the key elements of future technical standards. The deadline for comments on both the consultation paper and the discussion paper was 1 August 2014.

Latest ESMA papers

On 19 December 2014, ESMA published a final report containing its technical advice to the Commission on the possible content of the delegated acts. It also published a consultation paper seeking stakeholders’ views on certain RTS and ITS.

Final technical advice

The final report follows the same structure as the earlier consultation paper that ESMA published on 22 May 2014 which is: (1) introduction; (2) investor protection; (3) transparency; (4) data publication; (5) micro-structural issues; (6) requirements applying on and to trading venues; (7) commodity derivatives; and (8) portfolio compression. The final report also contains summaries of the responses that ESMA received to its earlier consultation paper.

ESMA states that the rationale of those items that were already covered in the earlier consultation paper and for which no relevant changes have been introduced, has not been further developed in the final report. Therefore ESMA recommends that the final report should be read together with the earlier consultation paper.

The delegated acts should be adopted by the Commission so that they enter into application by 30 months following the entry into force of MiFID II and MiFIR, taking into account the right of the European Parliament and the Council of the EU to object to a delegated act within 3 months (which can be extended by a further 3 months).

Consultation on draft RTS and ITS

The consultation paper on draft RTS and ITS follows the same structure as the earlier discussion paper that ESMA published on 22 May 2014 which is: (1) introduction; (2) investor protection; (3) transparency; (4) micro-structural issues; (5) data publication; (6) requirements applying on and to trading venues; (7) commodity derivatives; (8) market data reporting; and (9) post trading issues. The consultation paper also contains summaries of the responses that ESMA received to its discussion paper.

It is worth noting that in the third section of the consultation paper covering transparency, ESMA presents an analysis of non-equity instruments aimed at calibrating the new transparency rules through appropriate thresholds. However, the analysis does not cover foreign exchange derivatives, credit derivatives, other derivatives and contracts for difference. For these asset classes ESMA will produce a separate consultation paper with a similar analysis to that undertaken for the other asset classes. It is expected that this consultation paper will be published in early 2015.

The deadline for comments on the consultation paper is 2 March 2015. In addition, an open hearing will be held in Paris on 19 February 2015.

ESMA will use the input received from the consultation to finalise the draft RTS which will be sent for endorsement to the Commission by mid-2015, the ITS by January 2016.

MiFID II / MiFIR and its implementing measures will be applicable from 3 January 2017.

Briefing notes

We will shortly be updating our MiFID II / MiFIR briefing notes to take into account the new ESMA papers.

View ESMA provides implementing rules for MiFID II, 19 December 2014