The European Securities and Markets Authority (ESMA) has published the speech given by its chairman, Steven Maijoor, to the Economic and Monetary Affairs Committee of the European Parliament (ECON).

In his speech Mr Maijoor covers ESMA’s work on the implementing measures under MiFID II / MiFIR concerning:

  • non-equity transparency. Mr Maijoor mentions that ESMA will not be able to find the ideal system balancing transparency and liquidity and at the same time satisfy the preferences of stakeholders. However, Mr Maijoor states that he does believe that ESMA has made significant progress towards creating a more adaptable and better calibrated system over the past half year and its public consultation process in that context provided valuable input. In relation to bond market transparency, Mr Maijoor explains that ESMA took careful note of the concerns made by ECON at the last hearing and went back to the drawing board to re-assess the two approaches that it had considered: the Classes of Financial Instruments Approach (COFIA) and the Instrument by Instrument Approach (IBIA). Mr Maijoor states that ESMA has worked over the last few weeks on both options in order to find the right balance between accuracy, predictability and cost-efficiency which will be the main principles guiding the final decision of the ESMA board;
  • position limits. Mr Maijoor states that a number of voices have expressed concerns on the range of potential limits going from 10% to 40%. This range is the result of a baseline of 25% with an adjustment of plus or minus 15%. According to Mr Maijoor certain observers consider that the baseline should be lower than 25% with some quoting specific examples where either a limit of 10% is considered too strict while a limit of 40% could be seen as unreasonably broad. However, Mr Maijoor argues that focusing on extreme and unlikely combinations does not do justice to the soundness of the regime. He adds that he does “not know of any national regulator who is intending to apply the lowest limit to the most illiquid contracts and furthest settlement dates or who intends to apply the maximum limit to the spot month of a liquid essential commodity”; and
  • ancillary activity test. Mr Maijoor explains that ESMA is aware that the stakes are high and it has taken careful note of the concerns expressed from the energy and other non-financial sectors. Mr Maijoor states that ESMA is willing to approach this test cautiously but also emphasises that in his view the public discussion often goes in the wrong direction suggesting that the ESMA test is not right because it may require a MiFID licence for some non-financials. Mr Maijoor argues that this is the whole point of the test in the first place: the exemptions from financial regulation should be narrowed, opaque parts of the market should be reduced and large non-financial players conducting activities identical to financial players should compete on a level playing field. ESMA believes that creating a test that will exempt all non-financial players including those that are substantially involved in speculative trading in commodities derivatives, would clearly be against Level 1. ESMA is instead proposing a real test while designing it in a cautious and pragmatic way.

View Steven Maijoor at ECON MiFID II / MiFIR scrutiny hearing, 15 July 2015