The Magnitude of change should not be underestimated

This week has seen the publication of the final draft technical standards on some of the biggest regulatory events to impact the industry, namely MiFID II, MiFIR, MAR and CSDR. These have now been sent to the European Commission for endorsement and once endorsed the Commission has three months in which to approve them. However the important point is that both the regulatory technical standards and implementing technical standards have been published. This is a long awaited event for the industry as each firm wrestles with what it wants and needs to be in the future, its business, products, operating models and naturally compliance.



Both of these required 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. The publication of this significant final report comprises of over 400 pages covering proposals for 28 final draft technical standards in the following areas:


  • Transparency
  • Market microstructure
  • Data publication and access
  • Trading venues
  • Commodity derivatives
  • Market data reporting
  • Post-trading
  • Investor protection

The final report discusses the feedback received to the previous consultations and the rationale behind ESMA’s final proposals. All of the technical standards are RTS except for one ITS that relates to trading venues focusing on the function of MTFs and OTFs


MAR requires ESMA to develop draft RTS and draft ITS on a number of prospectus related matters. 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:


  1. 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);
  2. The conditions, restrictions, disclosure and reporting obligations for buy-back programmes and stabilisation measures (RTS);
  3. 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);
  4. The establishment, maintenance and termination of accepted market practices (RTS);
  5. The arrangements, systems, procedures and notification templates to report suspicious orders and transactions (RTS);
  6. The technical means for the public disclosure of inside information and its delay (ITS);
  7. The precise format of insider lists and the format to update them (ITS);
  8. The format and template for the notification of managers’ transactions (ITS); and
  9. 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).



The final report now published includes the feedback from the second consultation and the proposed changes that ESMA has made in key areas. 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.”


View print version The Magintude of Change

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