On 19 May 2020, the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) published recommendations in connection with the current review of the (recast) Markets in Financial Instruments Directive (MiFID II).
The AFM notes that these recommendations are part of its further efforts to ensure the orderly functioning of the European financial markets and to strengthen investor protection. According to the AFM this is particularly important in view of the current market conditions around the world as a result of the corona crisis.
MiFID II, which came into force on 3 January 2018, is currently being reviewed by the European Commission and the European Securities and Markets Authority (ESMA) on the basis of the review articles in level 1 (article 90 MiFID II and article 52 of the Markets in Financial Instruments Regulation). ESMA has submitted the first final reports (MiFID II review reports) to the Commission, other reports are in the consultative or drafting stage. The Commission launched a consultation from February 18 until May 15 2020 on the review of MiFID II, with the aim of submitting a legislative proposal to the Council and the European Parliament in the second half of 2020.
In anticipation of potential changes to MiFID II, the AFM has carried out an internal impact analysis on the impact of MiFID II. This analysis was drafted on the basis of desk research, interactions with stakeholders (including a roundtable), data analysis and the supervisory experience with MiFID II for the first two years. The aim of the AFM’s analysis was to make policy recommendations for any changes in the regulatory framework of MiFID II (level 1 or level 2), by making suggestions for further ESMA guidance at level 3 and for further supervisory convergence by ESMA members. In the impact analysis the AFM discusses the main conclusions for the following areas: equity, commodities and investor protection. The AFM intends to cover fixed income in a subsequent publication.
Central underlying themes for equity are whether transparency has increased sufficiently, what the impact is on liquidity and how the market structure has changed, as a consequence of MiFID II. For commodities, the AFM investigated the impact of the introduction of position limits, position management controls and pre-trade transparency requirements for trading venues that trade in commodity derivatives in the Netherlands. The MiFID II regime has enhanced retail and professional investor protection throughout the European Union (EU).
The annex to the impact analysis contains a table with proposed amendments to level 1 and level 2 rules based on the AFM’s conclusions.