Regulation

ESMA consults on MiFID reforms

The European Securities and Markets Authority (ESMA) has launched a consultation process for the implementation of the revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

This is the first step in the process of translating the MiFID II/MiFIR requirements into practically applicable rules and regulations to address the effects of the financial crisis and to improve financial market transparency and strengthen investor protection.
 
MiFID II/MiFIR introduces changes that will have a large impact on the EU’s financial markets. These include transparency requirements for a broader range of asset classes; the obligation to trade derivatives on-exchange; requirements on algorithmic and high-frequency-trading and new supervisory tools for commodity derivatives. It will also strengthen protection for retail investors through limits on the use of commissions; conditions for the provision of independent investment advice; stricter organisational requirements for product design and distribution; product intervention powers; and the disclosure of costs and charges.
 
MiFID II/MiFIR contains over 100 requirements for ESMA to draft Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS), and to provide technical advice to the European Commission to allow it to adopt delegated acts.
 
In order to ensure that MIFID II achieves its objectives in practice, ESMA is publishing the following documents:
 
1. Consultation Paper on MiFID/MiFIR Technical Advice – ESMA needs to deliver this advice to the European Commission by December 2014 and is therefore subject to a condensed consultation process for this paper; and
 
2. Discussion Paper on MiFID/MiFIR draft RTS/ITS – this will provide the basis for a further consultation paper on the draft RTS/ITS which is expected to be issued in late 2014/early 2015.
 
The closing date for responses to both papers is 1 August.
 
Steven Maijoor, ESMA chair, says: “The launch of today’s MiFID II/MiFIR consultation process is an important step in the biggest overhaul of financial markets regulation in the EU for a decade. The reform of MiFID is an integral part of the EU’s strategy to address the effects of the financial crisis and aims to bring greater transparency to markets and to strengthen investor protection. These changes are key to restoring trust in our financial markets.
 
“We appreciate the magnitude of this exercise for stakeholders. We strongly encourage all those affected by these reforms to provide their views to ensure that we take them into account in our final proposals.”
 
The main issues covered in the discussion and consultation paper are divided into those addressing the structure, transparency and regulation of financial markets, and those aimed at strengthening investor protection.

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