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Financial Regulatory Developments Focus
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The following posts provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.

  • EU Restrictions on Contracts for Difference Lifted in Wake of National Measures
    07/31/2019

    The European Securities and Markets Authority has announced that it will not again renew its product intervention measure for Contracts for Differences. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU. ESMA's first restrictions on the marketing, distribution and sale of CfDs to retail clients applied from August 1, 2018 and was then extended every three months because ESMA did not consider that the consumer protection risk had been addressed. ESMA's view is that because most national regulators in EU member states have now adopted permanent measures, its own temporary restrictions do not need to be extended. The U.K. Financial Conduct Authority has imposed permanent restrictions on the sale, marketing and distribution of CfDs and CfD-like options to retail consumers. The rules will apply to all CfDs entered into from August 1, 2019, and to CfD-like options entered into from September 1, 2019.

    Read more.
  • UK Regulator Provides Guidance on Regulatory Perimeter and Crypto-Assets
    07/31/2019

    The U.K. Financial Conduct Authority has published a Policy Statement and final Guidance on Crypto-assets. The Policy Statement summarizes the feedback received to the FCA's consultation on draft Guidance and sets out the FCA's response to that feedback. The final Guidance is, for the most part, the same as that on which the FCA consulted, except the FCA has made some drafting changes to provide further clarity and has added some guidance on stablecoins and airdrops. In addition, the FCA has revised the taxonomy by making a distinction between: (i) unregulated tokens, which are exchange tokens and utility tokens; and (ii) regulated tokens, which are security and e-money tokens.

    The Guidance is intended to clarify the FCA's expectations for firms carrying on crypto-asset activities within the U.K. by providing insight for market participants on whether certain crypto-assets are within the FCA's regulatory perimeter or are otherwise regulated. The FCA highlights that the Guidance should be used by firms to understand the regulatory status of their crypto-asset activities, but assessing whether a crypto-asset or related activity is within the regulatory perimeter can only be done on a case-by-case basis. Firms should also refer to the FCA's Perimeter Guidance Manual (PERG) in its Handbook, and where firms need further clarification, they should contact the FCA and/or obtain external legal advice.

    The Guidance provides an overview of the U.K. regulatory perimeter and discusses relevant concepts, such as "by way of business." It also refers to the territorial scope of the regulatory perimeter, referring to the detailed guidance in PERG and highlighting that where part of an activity is carried on outside the U.K., a firm may still be carrying on a regulated activity in the U.K.

    Read more
  • EU Call for Evidence on the Impact of the Inducements and Charges Disclosure Requirements Under MiFID II
    07/17/2019

    The European Securities and Markets Authority has launched a call for evidence on the impact of the inducements and costs and charges disclosure requirements under the revised Markets in Financial Instruments Directive. MiFID II restricts the payment or receipt of all fees, commissions and non-monetary benefits (which are defined as so-called "inducements") unless these enhance the quality of service provided to a client and do not impair an EU investment firm's duty to act in the best interests of its client. EU investment firms are obliged to disclose to each client all fees, commissions and non-monetary benefits received by them in connection with any investment service provided by them to that client.

    Read more.
    TOPIC: MiFID II
  • EU Report on Sanctions and Measures Imposed under MiFID II in 2018
    07/17/2019

    The European Securities and Markets Authority has published a report on enforcement actions taken across the EU for breach of the revised Markets in Financial Instruments package. The report covers administrative sanctions and measures as well as criminal sanctions in aggregated form for 2018. ESMA notes that the data is limited because MiFID II has only applied since January 3, 2018, and some Member States were late in applying the requirements. Therefore, ESMA does not believe that it is possible to detect any trends using the limited data. ESMA will produce the same report annually, based on the submission of information from national regulators.

    View the report.
    TOPICS: EnforcementMiFID II
  • EU Consultation on Guidelines on Compliance Function Requirements under MiFID II
    07/15/2019

    The European Securities and Markets Authority has published a consultation paper on proposed guidelines on the compliance function requirements that are set out in the revised Markets in Financial Instruments package. The consultation closes on October 15, 2019 and ESMA intends to publish its final guidelines in Q2 2020. The final guidelines will replace ESMA's guidelines that were issued in 2012 under MiFID I because some of the 2012 guidelines are now set out in MiFID II or its secondary legislation and so reflect the enhanced role of the compliance function under MiFID II.

    Read more.
    TOPIC: MiFID II
  • EU Evaluates MiFID II's Success in Improving Trade Data Quality, Availability and Costs
    07/12/2019

    The European Securities and Markets Authority has launched a consultation on the development of pre- and post-trade transparency data and the functioning of the consolidated tape for equity instruments under the revised Markets in Financial Instruments package. The consultation paper sets out ESMA's initial views, taking into account feedback received during earlier roundtables and questionnaires. Responses to the consultation should be provided by September 6, 2019. ESMA will consider the feedback it receives in preparing its final report, which it intends to submit to the European Commission in December 2019. The final report will assist the Commission in preparing its review reports to the European Parliament and Council of the European Union, which are expected to be published in 2020.

    Read more.
    TOPIC: MiFID II
  • EMIR Refit: EU Clarification on Derivatives Trading and Clearing Obligations
    07/12/2019

    The European Securities and Markets Authority has issued a Statement clarifying the application and interaction of the EU derivatives clearing and trading obligations following the entry into force of the revised European Market Infrastructure Regulation, known as EMIR Refit.

    EMIR Refit has, subject to limited exceptions, applied directly across the EU since June 17, 2019. EMIR Refit amended the definition of a Financial Counterparty, bringing central securities depositories authorized under the EU Central Securities Depositories Regulation within scope and categorizing all Alternative Investment Funds as FCs (or, for non-EU funds, as third-country entities equivalent to FCs). It also introduced a clearing threshold for FCs, meaning that small FCs are exempt from the clearing obligation. In addition, Non-Financial Counterparties that meet the clearing threshold no longer must clear all derivatives that they enter that are subject to the clearing obligation, but only those derivatives in the asset class for which they have exceeded the threshold.

    Read more.
    TOPICS: DerivativesMiFID II
  • Firms Criticized for Non-Compliance with the EU Contracts For Difference Product Intervention Measures
    07/11/2019

    The European Securities and Markets Authority has published a Statement cautioning contracts for difference providers to comply with its temporary product intervention measure restricting the marketing, distribution or sale of CfDs to retail clients. The measure is due to expire at the end of the day on July 31, 2019, unless ESMA again renews it.

    In its Statement, ESMA states that it has noticed and is concerned that certain firms are not complying with the temporary CfD restriction or any similar permanent national measure. ESMA reminds firms that the temporary CfD restriction does not apply to eligible counterparties or professional clients, including to retail clients who opt to being treated as professional clients, as defined in the revised Markets in Financial Instruments Directive. However, firms must comply with the MiFID II requirements when dealing with a retail client that requests to opt up to being treated as a professional client, including by alerting clients to the loss of protection afforded by the temporary CfD restriction. ESMA also reminds firms that they should not incentivize a retail client to become a professional client by using language that promotes the status or benefits of professional clients.

    Read more.
  • UK Conduct Regulator Proposes Banning the Sale to Retail Clients of Derivatives Referencing Crypto-Assets
    07/03/2019

    The U.K. Financial Conduct Authority has launched a consultation proposing to restrict the sale, marketing and distribution of derivatives and exchange-traded notes that reference certain types of unregulated, transferable crypto-asset to all retail clients by firms in, or from, the U.K. The FCA consultation follows the final report of the U.K. Crypto-Assets Task Force in October 2018. The FCA's view is that although the U.K.'s market in crypto-assets is relatively small, there is still a consumer protection issue that needs to be addressed.

    Read more.
  • UK Regulator Justifies Ignoring EU Opinion on CfD Rules
    07/02/2019

    The U.K. Financial Conduct Authority has published a statement setting out its reasons for failing to act in accordance with the European Securities and Markets Authority's Opinion on the FCA's measures restricting the sale of Contracts for Difference and CfD-like options to retail customers. Where a national regulator takes product intervention measures under the Markets in Financial Instruments Regulation, ESMA must adopt an opinion on whether those measures are justified and proportionate. If ESMA's opinion states that the measures are not justified and proportionate and a national regulator declines to take action on the basis of ESMA's opinion, the national regulator must immediately publish a statement on its website explaining why it has adopted that course of action.

    Read more.
    TOPICS: MiFID IISecurities
  • EU to Lift Temporary Ban on the Sale of Binary Options to Retail Clients in Wake of National Measures
    07/01/2019

    The European Securities and Markets Authority has ended its temporary prohibition on the marketing, distribution or sale of binary options to retail clients. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU.

    Read more.
  • UK Regulator Publishes Rules Restricting Sale of Contracts for Difference and Related Options
    07/01/2019

    The U.K. Financial Conduct Authority has published the Conduct of Business (Contracts for Difference) Instrument 2019, implementing product intervention measures designed to restrict the sale, marketing and distribution of contracts for difference and contract for difference-like options to retail consumers. The rules will affect: (i) retail clients who invest, or may invest, in CFDs and CFD-like options; (ii) investment firms caught by the provisions of the Markets in Financial Instruments Directive (including those caught by the Capital Requirements Directive, where appropriate) that are involved in marketing, distributing or selling CFDs and CFD-like options in, or from, the U.K. to retail clients; and (iii) U.K. branches of third-country investment firms that are involved in marketing, distributing or selling CFDs or CFD-like options to retail clients.

    Read more.
  • European Commission Publishes Commission Delegated Regulation Amending Registration Conditions for SME Growth Markets
    06/21/2019

    An amending Commission Delegated Regulation to the existing Commission Delegated Regulation (Regulation 2017/565) on requirements for participants in SME growth markets has been published in the Official Journal of the European Union. Regulation 2017/565 supplements related provisions under the Markets in Financial Instruments Directive, which establishes "SME growth markets" as a new type of trading venue for small and medium sized enterprises.

    Read more.
  • UK FICC Markets Standards Board Announces Consultation on Draft Statement of Good Practice
    06/20/2019

    The U.K. FICC Markets Standards Board has published a Transparency Draft of its new Statement of Good Practice on Conflicts of Interest. The Statement aims to provide guidance for participants in the fixed income, currencies and commodities markets on ways to identify and manage risks arising from conflicts of interest in the FICC markets. The guidance is particularly targeted at firms operating in Europe and the conflicts that may arise from the sale and trading of publicly listed or over-the-counter securities or financial instruments. 

    Read more.
  • UK Conduct Regulator Publishes Dear CEO Letter on its Wealth Management and Stockbroking Supervision Strategy
    06/13/2019

    The U.K. Financial Conduct Authority has published a "Dear CEO" letter addressed to wealth management and stockbroking firms, identifying the key areas of focus for its two-year Wealth Management and Stockbroking supervision strategy. In the letter, the FCA identifies the four key types of harm for customers in this sector as: (i) reductions in savings and investments due to fraud, investment scams and inadequate client money or assets controls; (ii) loss of confidence in the industry due to mismanagement of conflicts of interest and market abuse; (iii) reductions in savings and investments due to substandard order handling procedures and execution processes; and (iv) inability to understand the costs of services provided by firms as a result of insufficient or inaccurate disclosure.

    Read more.
  • European Securities and Markets Authority Publishes Final Report on Frequent Batch Auctions
    06/11/2019

    The European Securities and Markets Authority has published a final report presenting the feedback to its November 2018 call for evidence, which sought to improve its understanding of "frequent batch" auction systems and their use in the circumvention of the "double volume cap" imposed under the Markets in Financial Instruments Regulation and transparency requirements under the revised Markets in Financial Instruments Directive (or MiFID II). ESMA intends to produce further guidance on areas highlighted in the report, particularly focusing on price determination and pre-trade transparency, and will review the broader effects of the MiFID II transparency regime.

    Read more.
    TOPIC: MiFID II
  • European Securities and Markets Authority Launches Common Supervisory Action on MiFID II Appropriateness Rules
    06/03/2019

    The European Securities and Markets Authority has announced that it will launch a common supervisory action in the second half of 2019 on the application of the appropriateness requirements under the revised Markets in Financial Instruments Directive. The action will be undertaken as part of ESMA's mandate to build a culture of common supervision among EU national regulators.

    Read more.
  • Revised EU Statement on the Share Trading Obligations in a No-Deal Brexit
    05/29/2019

    Following concerns regarding its March 19, 2019 statement, the European Securities and Markets Authority has published a revised statement on the impact of a no-deal Brexit on the trading obligation for shares where no decision on the U.K.'s equivalence as a third country market has been made. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The U.K. has adopted this requirement in its onshored MiFID II legislation. Similarly, following its exit from the EU, the new U.K. on-shored share trading obligation would restrict trading of shares in the U.K. to trades on U.K. trading venues unless a third-country equivalence decision was made.

    Read more.
  • EU Authority Asks for Feedback on the MiFID II Position Limits Regime for Commodity Derivatives
    05/24/2019

    The European Securities and Markets Authority has published a Call for Evidence on position limits and position management in commodity derivatives introduced by the revised Markets in Financial Instruments Directive. MiFID II requires the European Commission to report to the European Parliament and the Council on the impact of the application of position limits and position management on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets. ESMA has been asked to provide the Commission with advice regarding this new regime to support the Commission's preparation of the report.

    Read more.
    TOPICS: DerivativesMiFID II
  • European Commission Investigates Anti-Competitive EU Loan Syndication
    05/05/2019

    A report examining competition within the European syndicated loan market has been published, following a call by the European Commission for an examination of the sector. The report was prepared at the request of the Commission by consultancy firm Europe Economics with input from boutique competition law firm Euclid Law.

    Read more.
  • EU Technical Advice on Incorporating Sustainability Factors Into EU Regulation
    05/03/2019

    The European Securities and Markets Authority has published its final report and technical advice to the European Commission on incorporating sustainability risks and factors into European regulation. The European Commission sought advice from ESMA and the European Insurance and Occupational Pensions Authority in July 2018 on the introduction of environmental, social and governance considerations into the Markets in Financial Instruments Directive II, the Insurance Distribution Directive, the Alternative Investment Fund Managers Directive, the Undertakings for Collective Investment in Transferable Securities Directive and the Solvency II Directive. The introduction of sustainability considerations into European regulation sits against the backdrop of the European Commission's Sustainability Action Plan, which aims to encourage sustainable investment and mitigate climate change risk in line with the 2016 Paris Agreement and UN 2030 Agenda for Sustainable Development. In response, ESMA opened consultations seeking input from stakeholders, which closed on February 19, 2019.

    Read more.
  • Further Extension of the EU Contracts for Difference Product Intervention Measures
    04/30/2019

    The European Securities and Markets Authority has issued a Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients. This has now been published in the Official Journal of the European Union. ESMA announced on March 27, 2019, that the existing restriction would be extended on the same terms as the previously implemented temporary restrictions. The CfD Decision applies directly across the EU from May 1, 2019, for a period of three months.

    View the decision.
  • UK Regulator Delays Final Product Intervention Measures on Contracts for Difference
    04/26/2019

    The Financial Conduct Authority has published a statement on the delay to publication of final rules for contracts for difference products and CfD-like options. The FCA has consulted on its proposals to make European Securities and Markets Authority's temporary product intervention measures permanent in the U.K. The FCA's proposed interventions are the same in substance as ESMA's, although it is also proposing to apply its rules to closely substitutable products and on extending these measures to exchange-traded derivatives. The consultation closed on February 7, 2019.

    Read more.
  • EU FOREX Broker Faces Proceedings in Czech Courts Brought by "Consumer" Client Following EU Opinion
    04/24/2019

    Individuals who act outside their trade or profession when instructing brokers to execute FOREX contracts on their behalf must be regarded as "consumers" for the purposes of the Recast Brussels Regulation, according to a recent opinion issued by the Advocate General of the Court of Justice of the European Union. This applies regardless of the expertise of the individual or their active involvement in placing orders. Under the Recast Brussels Regulation (which governs jurisdiction between EU member states), "consumers" are entitled to bring proceedings before the court of the Member State in which they are domiciled, as opposed to being obliged to rely on the courts of the respondent counterparty's Member State.

    In this case, the claimant, a student domiciled in the Czech Republic, had entered into an agreement for the execution of contracts for difference in the FOREX market via Cypriot brokerage company FIBO Group Holdings Ltd. The agreement was expressly subject to the jurisdiction of the Cypriot courts. The claimant brought a claim in the Czech court, alleging that FIBO had been unjustly enriched when the claimant's instructions to close out a position in U.S. dollars were not acted on promptly. The time delay meant exchange rates had changed before the trade was executed, significantly reducing her profit.

    Read more.
  • European Securities and Markets Authority Publishes Supervisory Briefing on MiFID II Appropriateness Rules
    04/04/2019

    The European Securities and Markets Authority has published an updated version of its supervisory briefing on appropriateness. The original appropriateness briefing was published in December 2012 to provide guidance to EU national regulators on the appropriateness requirements under the original Markets in Financial Instruments Directive. The updated appropriateness briefing reflects the amended requirements introduced by the revised Directive or MiFID II and takes into account the new version of ESMA's suitability guidelines published in May 2018 to the extent they are relevant to the appropriateness rules.

    Read more.
  • UK Financial Conduct Authority Implements Permanent Ban of Sale of Binary Options to Retail Consumers
    03/29/2019

    Following its recent consultation, the U.K. Financial Conduct Authority has published a Policy Statement, final rules and a Statement on the new product intervention measure it is introducing for retail binary options. Both contracts for difference and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by certain providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000 allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The FCA also consulted on product intervention rules for CfDs and those final rules are expected to be published in April this year.

    Read more.
  • EU Contracts for Difference Product Intervention Measures to be Extended
    03/27/2019

    The European Securities and Markets Authority has announced that its restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from May 1, 2019, for a further three months. The extension will be on the same terms as the existing product intervention measure.

    View ESMA's announcement.

    View details of the existing decision.
  • EU Product Intervention Measures for Binary Options Extended
    03/27/2019

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from April 2, 2019. This has now been published in the Official Journal of the European Union. ESMA announced in February this year that the existing restriction would be extended. The binary options Decision applies directly across the EU from April 2, 2019, for a period of three months.

    View the decision.

    View ESMA's notification.
  • EU Statement on the Impact of a No-Deal Brexit on the Share Trading Obligation
    03/19/2019

    May 29, 2019 update: ESMA's guidance of March 19, 2019 has been superseded by revised guidance issued, details of which are available here.

    The European Securities and Markets Authority has published a statement on the impact of a no-deal Brexit on the trading obligation for shares. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The requirement is not applicable to transactions in shares traded in the EU on a non-systematic, ad-hoc, irregular and infrequent basis. ESMA's statement is relevant should there be a no-deal Brexit (currently set for March 29, 2019) and there is no equivalence decision for the U.K.

    Read more.
  • UK Regulator Wants Stronger Wind-Down Plans for Loan-Based Crowdfunding Platforms
    03/07/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to loan-based peer-to-peer crowdfunding platforms requesting the platforms to review their wind-down arrangements. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.

    Read more.
  • Further EU Clarification For Financial Services Firms in a No Deal Brexit
    03/07/2019

    The European Securities and Markets Authority has published a statement on its approach to certain provisions of the Markets in Financial Instruments package and the Benchmarks Regulation in the event of a no-deal Brexit.

    Read more.
  • UK Financial Conduct Authority on Onshoring the EU Temporary Product Intervention Measures
    02/22/2019

    The U.K. Financial Conduct Authority has published a statement on onshoring of the European Securities and Markets Authority's temporary product intervention measures on retail contracts for difference and binary options products.

    In June 2018, ESMA issued decision notices prohibiting the marketing, distribution or sale of binary options to retail clients and restricting the marketing, distribution or sale of CFDs to retail clients. These decisions have been renewed by ESMA and are currently due to expire on April 1, 2019 for binary options and April 30, 2019 for CFDs. Under the European Union (Withdrawal) Act 2018, the decisions will become part of U.K. domestic law on March 29, 2019, if the U.K. leaves the EU on that date without a ratified Withdrawal Agreement.

    Read more.
  • EU Product Intervention Measures for Binary Options to be Further Extended
    02/18/2019

    The European Securities and Markets Authority has announced that its prohibition on the marketing, distribution or sale of binary options to retail clients will be extended for a further three months from April 2, 2019. ESMA's ban has been in effect since July 2, 2018.

    View ESMA's announcement.

    View details of the existing product intervention measure for binary options.
  • EU Contracts for Difference Product Intervention Measures Extended Again
    01/31/2019

    The European Securities and Markets Authority Decision renewing the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients has been published in the Official Journal of the European Union. ESMA announced on December 19, 2018, that the existing restriction would be extended. The CfD Decision applies directly across the EU from February 1, 2019, for a period of three months.

    View the decision.

    View ESMA's announcement.
  • UK Conduct Regulator Consults on Guidance on Crypto-Assets and the UK Regulatory Perimeter
    01/23/2019

    The U.K. Financial Conduct Authority has launched a consultation on proposed Guidance on whether certain crypto-assets fall within the U.K.'s regulatory perimeter (CP19/3). The FCA's consultation is in response to one of the commitments made by the U.K. Cryptoasset Taskforce last year in its final Cryptoassets Report. The Taskforce was established in March 2018 and comprises representatives from HM Treasury, the FCA and the Bank of England. The FCA's consultation closes on April 5, 2019. The FCA intends to publish the final Guidance on the existing regulatory perimeter in relation to crypto-assets by summer 2019.

    The FCA's proposed Guidance is intended to help firms determine whether certain crypto-assets fall within the FCA's regulatory perimeter. However, the FCA notes that assessing whether a crypto-asset is within the perimeter can only be done on a case-by-case basis and that the responsibility for ensuring that it has the correct permissions lies with the firm undertaking the activity. A firm that undertakes a regulated activity without the requisite permissions will be in breach of the 'general prohibition' in the Financial Services and Markets Act 2000. Any such breach by a person is a criminal offence and the person may be imprisoned or fined, or both. The consultation is relevant to a wide range of consumers, stakeholders and firms, in particular firms that issue or create crypto-assets, firms that market, sell, buy, hold or store crypto-assets, financial advisors, investment managers and investment exchanges.

    Read more.
  • European Securities and Markets Authority Publishes Recommendations on Crypto-Assets and Initial Coin Offerings
    01/09/2019

    The European Securities and Markets Authority has published a report on the application and suitability of the EU securities regulatory framework to crypto-assets, including Initial Coin Offerings. The report is in response to the European Commission's request in its FinTech Action Plan 2018. Like the European Banking Authority, which published a report on the same day in relation to banking sector issues, ESMA found that EU activities related to crypto-assets are fairly low and do not present any financial stability risks.

    ESMA's report focuses on the legal qualification of crypto-assets under EU financial securities laws and highlights that this may differ across EU member states because it will be subject to the national laws implementing EU legislation. ESMA notes that there is currently no legal definition of crypto-assets and that a key consideration is whether a crypto-asset qualifies as a financial instrument under the revised Markets in Financial Instruments package. Where a crypto-asset qualifies as a MiFID financial instrument, the full requirements under various securities legislation may apply, subject to any applicable exemptions.  According to ESMA, the rules in the Prospectus Directive would apply to an issue of crypto-assets offered to the public, including through an ICO, where the instruments are transferable securities. 

    Read more.
  • UK Conduct Regulator Warns Firms About Misleading Financial Promotions
    01/09/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to the Chief Executive Officers of all FCA-regulated firms. In the letter, the FCA highlights its concerns over the practice engaged in by some firms of issuing financial promotions which suggest or imply that all of the activities or investments undertaken by the firm are regulated by the FCA and/or Prudential Regulation Authority, when they are not.

    Some regulated firms undertake both regulated and unregulated business. The FCA has identified that some of these firms are issuing financial promotions which do not make clear which aspects of its business are not regulated by the FCA and/or PRA. This breaches the requirement that all financial promotions are fair, clear and not misleading and that a firm cannot indicate or imply that it is regulated or otherwise supervised by the FCA for its unregulated business. The FCA encourages all firms to reflect on the letter and ensure that their actions comply with the FCA's rules relating to financial promotions.

    View the letter
  • EU Product Intervention Measure Banning the Sale of Binary Options is Extended
    12/27/2018

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. This has been published in the Official Journal of the European Union. ESMA announced in November 2018 that the existing restriction would be extended. The binary options Decision applies directly across the EU from January 2, 2019 for a period of three months.

    View the Decision.

    View ESMA's notification.
  • EU Guidelines on Commodity Derivatives Definition Published
    12/21/2018

    The European Securities and Markets Authority has published amended Guidelines on definitions of commodity derivatives and their classification. The amended Guidelines, which are an update to the guidelines originally adopted under the previous Markets in Financial Instruments Directive (MiFID I), have been adapted to the new MiFID II regulatory framework without amending their substance.

    Read more.
    TOPIC: MiFID II
  • EU Contracts for Difference Product Intervention Measures to be Extended Again
    12/19/2018

    The European Securities and Markets Authority has published a statement announcing that its various restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from February 1, 2019, for a further three months. ESMA has powers under the Markets in Financial Instruments Regulation to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the European Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire, and it would then fall to member states to impose similar restrictions at a national level, if they so wish.

    ESMA considers that a significant investor protection concern in relation to retail clients still exists. Its statement confirms that the existing restriction, implemented on November 1, 2018, will be extended from February 1, 2019 for a further three months.

    View ESMA's statement.

    View details of the existing CfD restrictions.
  • European Commission Adopts Legislation to Promote Small and Mid-sized Enterprises Growth Markets
    12/13/2018

    Following its consultation earlier this year on a proposed regulation, the European Commission has adopted a Delegated Regulation regarding certain registration conditions to promote the use of SME Growth Markets for the purposes of the revised Markets in Financial Instruments package, known as MiFID II. SME Growth Markets are a new sub-category of multilateral trading facility introduced by MiFID II in January 2018 to facilitate access to capital for SMEs. The adopted Delegated Regulation will amend existing delegated legislation under MiFID II to address regulatory barriers to the take-up of SME Growth Markets.

    Read more.
  • European Commission Adopts Amendments to Technical Standards On Systematic Internalisers' Quote Rules
    12/12/2018

    The European Commission has adopted a Delegated Regulation amending and correcting the Regulatory Technical Standards under the Markets in Financial Instruments Regulation on the equity transparency obligations of trading venues and investment firms. The RTS, known as RTS 1, is set out in Commission Delegated Regulation (EU) 2017/587, supplementing MiFIR. Under MiFIR, Systematic Internalisers must make public firm quotes in equity instruments. The quotes must: (i) be at least equivalent to 10% of the standard market size for the quoted instrument; (ii) include both a bid and an offer price for a size that could be up to market size; and (iii) reflect the prevailing market conditions for that instrument. RTS 1 specifies the concept of "prices reflecting prevailing market conditions" as being "close in price, at the time of publication, to quotes of equivalent sizes for the same financial instrument on the most relevant market in terms of liquidity."

    Read more.
    TOPIC: MiFID II
  • UK Conduct Authority Consults on Permanent Product Intervention Measures
    12/07/2018

    The U.K. Financial Conduct Authority has launched two consultations proposing to prohibit the sale, marketing and distribution of binary options to retail consumers and to restrict the sale, marketing and distribution of contracts for difference and similar products to retail customers. Both CFDs and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000, allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The proposed rules would be permanent and would replace the temporary measures introduced, and subsequently renewed, by the European Securities and Markets Authority earlier this year.

    Read more.
  • UK Conduct Regulator Publishes Second Consultation on Brexit-Related Changes to Its Rulebook and Binding Technical Standards
    11/26/2018

    The U.K. Financial Conduct Authority has published a second consultation on proposed changes to the FCA Handbook and guidance to ensure a functioning legal and regulatory framework for financial services in the event of a "no-deal" scenario whereby the U.K. exits the EU on March 29, 2019 without a ratified Withdrawal Agreement in place and there is consequently no transitional period for firms. The proposed amendments will not take effect on exit day if the U.K. enters into a transitional period.

    The consultation includes the FCA's further proposals in relation to those Binding Technical Standards that it has been empowered by HM Treasury to amend prior to Brexit and to maintain afterwards. Since the FCA's first consultation on Brexit-related Handbook changes in October 2018, HM Treasury has published further policy notes and/or financial services "onshoring" statutory instruments with proposed amendments to retained EU law. Many of the FCA's proposals on the BTS are consequential in nature and follow the amendments proposed in the statutory instruments.

    Read more.
  • EU Supervisory Authority Issues Updated Supervisory Briefing on MiFID II Suitability
    11/13/2018

    The European Securities and Markets Authority has published an updated version of its supervisory briefing on suitability. The original suitability briefing was published in December 2012 to provide guidance to EU national regulators on the suitability requirements under the original Markets in Financial Instruments Directive. The updated suitability briefing reflects the amended requirements introduced by the revised Markets in Financial Instruments Directive and takes into account the new version of ESMA's Suitability Guidelines that was published in May 2018.

    While the updated briefing is primarily aimed at national regulators, it should also assist market participants by providing indications of compliant implementation of the MiFID II suitability provisions.

    Read more.
    TOPIC: MiFID II
  • EU Supervisory Authority Issues Call for Evidence on Periodic Auctions for Equity Instruments
    11/09/2018

    The European Securities and Markets Authority has published a call for evidence on periodic auctions for equity instruments. ESMA wishes to gather more information on the functioning of so-called frequent batch auction trading systems. Frequent batch auctions for equities have rapidly gained market share since the introduction of the Double Volume Cap mechanism under the revised Markets in Financial Instruments package. This has given rise to concerns that this trading may be used as alternative to trading under the DVC waivers and/or as a way to avoid the pre-trade transparency requirements of systematic internalisers. ESMA has conducted a stock-take, assessing seven frequent batch auction systems operating in the EU and sets out its findings in the call for evidence.

    In the call for evidence, ESMA distinguishes conventional periodic auctions from frequent batch auctions and outlines the key characteristics of frequent batch auction systems operating in the EU. ESMA sets out its observation of a rising market share for equity trading on frequent batch auctions and considers developments in equity trading since the application of MiFID II. It seeks input on a range of questions focused on these issues.

    Responses to the call for evidence are invited by January 11, 2019. The call for evidence will be of particular interest to trading venues and investment firms trading in equity instruments, but ESMA also welcomes responses from any other market participants including trade associations and industry bodies, institutional and retail investors.

    ESMA will use the feedback to the call for evidence to assess whether and to what extent frequent batch auction systems can be used to circumvent the MiFID II transparency requirements and will develop appropriate policy measures if necessary.

    View the call for evidence.
    TOPIC: MiFID II
  • EU Supervisory Authority Will Extend Binary Options Ban Into 2019
    11/09/2018

    The European Securities and Markets Authority has announced that it proposes to renew the prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU. ESMA is renewing the prohibition on binary options because it considers that a significant investor protection concern remains. The measure will be renewed on the same terms as the previous renewal decision that has applied from October 2, 2018 and that will expire on January 1, 2019.

    ESMA's Board of Supervisors agreed on the renewal of intervention measures on November 7, 2018. ESMA will publish an official notice on its website in the coming weeks. The new Decision will then be published in the Official Journal of the European Union and will start to apply from January 2, 2019 for a period of three months.

    View ESMA's announcement.

    View details of the prohibition expiring on January 1, 2019.
  • EU National Regulators To Confirm If They Intend to Comply With MiFID II Suitability Guidelines
    11/06/2018

    The European Securities and Markets Authority has published on its website the official translations of its revised Guidelines on aspects of the suitability requirements under the revised Markets in Financial Instruments Directive.

    ESMA published the finalized Guidelines in May 2018, following a consultation between July and December 2017. The finalized Guidelines largely confirm ESMA's previous 2012 Guidelines on MiFID I, but have a broader scope and ESMA has added clarifications and refinements where necessary.

    Now that the Guidelines have been translated into the official EU languages and published on ESMA's website, national regulators will have a two-month period (expiring on January 6, 2019) in which to notify ESMA whether they comply or intend to comply with the guidelines. National regulators should state their reasons for non-compliance where they do not comply or do not intend to comply.

    Read more.
    TOPIC: MiFID II
  • EU Authority Calls for Non-Enforcement of Impending Clearing Obligation for Intragroup Transactions and Non-Financial Counterparties
    10/31/2018

    The European Securities and Markets Authority has issued a statement on the impending clearing obligation under the European Market Infrastructure Regulation. The statement is also relevant to the trading obligation under the Markets in Financial Instruments Regulation which is triggered by the EMIR clearing obligation.

    EMIR provides an exemption from the clearing obligation for intragroup transactions with a third-country group entity where one of the counterparties is a third-country group entity and there is an equivalence decision in respect of the third country in which it is situated. An equivalence decision would enable parties that are subject to both the EU and a third country's clearing obligation to comply only with one jurisdiction's requirements, but no equivalence decisions have been made to date for these purposes.

    Read more.
    TOPICS: DerivativesMiFID II
  • EU Contracts for Differences Product Intervention Measures Extended
    10/31/2018

    The European Securities and Markets Authority Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for differences to retail clients has been published in the Official Journal of the European Union. ESMA announced on September 28, 2018 that the existing restriction would be extended and would include an additional reduced character risk warning because CFD providers have experienced technical difficulties in using the risk warnings due to the character limitations imposed by third-party marketing providers. The CFD Decision applies directly across the EU from November 1, 2018 for three months.

    ESMA extended the temporary product intervention prohibiting the marketing, distribution and sale of binary options to retail investors for a further three months from October 2, 2018, although certain types of binary options were excluded from the scope of the prohibition because ESMA considers that those binary options are less likely to present a significant investor protection concern. Both of ESMA's product intervention measures are made using powers under the Markets in Financial Instruments Regulation.

    View the Decision.

    View details of the extension of the ban relating to binary options.
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