EU Level 2 Legislation on Market Soundings Published

Two EU Delegated Regulations containing technical standards on the requirements relating to market soundings under the Market Abuse Regulation were published in the Official Journal of the European Union. MAR will apply from July 3, 2016 except for those concepts that depend on the entry into effect of the revised Market in Financial Instruments Directive and the Market in Financial Instruments Regulation, which will apply from January 3, 2018.

The Regulatory Technical Standards are on the arrangements, systems and procedures for market participants disclosing inside information while conducting market soundings. The European Commission adopted the RTS on May 17, 2016. There are no changes between the adopted RTS and the final published RTS.

MAR provides that when a disclosing market participant discloses inside information during a market sounding, the disclosure will fall within a safe harbour, provided that certain conditions are met. The RTS require disclosing market participants to establish procedures which describe the way in which market soundings are conducted, to provide certain information to the person receiving the market sounding, including, where possible, an estimate as to when the information will cease to be inside information, and to keep records of the persons who have received market soundings.

In addition, a disclosing market participant must, once he assesses that the information has ceased to be inside information, provide the receiving individual with the following information: (i) the identity of the disclosing market participant; (ii) the date and time of the market sounding; (iii) the identification of the transaction subject to the market sounding; (iv) confirmation that the disclosed information has ceased to be inside information; and (v) the date on which the information ceased to be inside information. However, there is no precise time set for such cleansing to take place. The requirements are in line with the approach adopted by the European Securities and Markets Authority following its consultation on the proposed RTS. ESMA took the view that it would not be possible to establish procedures for a situation where a transaction failed or was abandoned, because the information might remain inside information.

MAR requires disclosing market participants to keep records of the communications of information during the course of market soundings. The Implementing Technical Standards provide for the format and template of the records of communications between a disclosing market participant and the persons receiving the market soundings.

View the RTS on market soundings.

View the ITS on records of market soundings.

You may like to view our client note, "EU Market Abuse Regulation—Implications for Non-EU Issuers with Securities Traded on an EU Market".