Introduction

The European Securities and Markets Authority (ESMA) has published final draft technical standards on the Markets in Financial Instruments Directive II (MiFID II), the Markets in Financial Instruments Regulation (MiFIR), the Market Abuse Regulation (MAR) and the Central Securities Depositories Regulation (CSDR).

MiFID II           

MiFID II and MiFIR require ESMA to develop a multitude of regulatory technical standards (RTS) and implementing technical standards (ITS). These technical standards were consulted on in a discussion paper published in May 2014 and two consultation papers published in December 2014 and February 2015.

ESMA has now published a significant final report which comprises of over 400 pages covering proposals for 28 final draft technical standards in the following areas: transparency (technical standards 1 – 5), market microstructure (technical standards 6 to 12), data publication and access (standards 13 to 16), requirements applying on and to trading venues (technical standards 17 to 19), commodity derivatives (technical standards 20 and 21), market data reporting (technical standards 22 to 25), post-trading (technical standard 26) and investor protection (technical standards 27 and 28). The final report discusses the feedback received to the previous consultations and the rationale behind ESMA’s final proposals.

Annexed to the final report are the final draft technical standards (Annex 1). All of these technical standards are RTS except for one ITS that relates to trading venues (covering the description of the functioning of multilateral trading facilities and organised trading facilities). A cost benefit analysis on the final draft technical standards can be found in Annex 2 of the final report.

MAR

MAR requires ESMA to develop draft RTS and draft ITS on a number of prospectus related matters. While developing the draft technical standards, ESMA consulted stakeholders by way of a discussion paper followed by a consultation paper.

The final report that ESMA has published on the MAR technical standards follows, to a large extent, the structure of the previous consultation paper, with the addition of the topic relating to the notification and the list of financial instruments. The final report has nine sections dealing with the topics on which the ESMA was mandated to draft technical standards:

  • the content of the notifications of financial instruments and the manner and conditions of the compilation, publication and maintenance of the list of financial instruments (RTS) and the timing, format and template of submission of the notifications of financial instruments (ITS);
  • the conditions, restrictions, disclosure and reporting obligations for buy-back programmes and stabilisation measures (RTS);
  • the arrangements, procedures and record keeping requirements for persons conducting market soundings (RTS), and systems and notification templates to be used in market soundings and the technical means for appropriate communication (ITS);
  • the establishment, maintenance and termination of accepted market practices (RTS);
  • the arrangements, systems, procedures and notification templates to report suspicious orders and transactions (RTS);
  • the technical means for the public disclosure of inside information and its delay (ITS);
  • the precise format of insider lists and the format to update them (ITS);
  • the format and template for the notification of managers’ transactions (ITS); and
  • the technical arrangements for the objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflict of interest (RTS).

Annexes V to XIII of the final report contain the text of the final draft technical standards.

CSDR

Like MAR and MiFID II, the CSDR mandates ESMA to develop a number of technical standards. In relation to these ESMA consulted stakeholders on two occasions. The first consultation on a discussion paper was conducted from 20 March to 22 May 2014. The second consultation, which included the proposed draft technical standards, was conducted from 18 December 2014 to 19 February 2015. ESMA launched a third consultation focusing only on the operation of the buy-in process from 30 June to 6 August 2015.

The final report now published includes the feedback from the second consultation and the proposed changes that ESMA has made in key areas. For each section of the final report, reference is made to the relevant article in the CSDR and to the relevant technical standards included in the annexes to the final report. The final report covers draft RTS and ITS on CSD requirements and internalised settlement. Given that ESMA only recently consulted on the buy-in process, it has decided to delay the delivery of the RTS on settlement discipline.

Magnitude of change should not be underestimated

ESMA’s chairman, Steven Maijoor, said: “The rules put out by ESMA today on MiFID II, MAR and CSDR will notably change the way Europe’s secondary markets function. And this will no doubt impact market participants and regulators alike. The magnitude of this change should not be underestimated. But the past has taught us that change is needed in order to make markets more transparent, efficient, and safer to invest in. This will entail a certain cost but we should not forget the other side of this equation, which is the great benefits safer and sounder markets will bring to everybody.”

Next steps

The final draft technical standards have been sent to the European Commission for endorsement. The Commission has three months in which to approve them. Once endorsed, both the European Parliament and the Council of the EU have an objection period.

View ESMA readies MiFID II, MAR and CSDR, 28 September 2015