INVESTMENT SERVICES & CAPITAL MARKETS
MiFID/MiFIR
ESMA updates Q&As on MIFID II and MIFIR transparency
On 5 September 2022, ESMA updated its Q&As on transparency topics under MIFID II and MIFIR. ESMA has included a new Q&A in the section on third country issues to confirm that transactions executed between two branches of the same legal entity, or a branch and its parent company, are not subject to transparency or transaction reporting requirements, as they do not entail a change in the ownership of financial instruments.
ESMA updates Q&As on MIFID II and MIFIR market structures
On 23 September 2022, ESMA published updated Q&As on market structures, ESMA has updated the section on direct electronic access and algorithmic trading, adding Q&A 35 on whether trading venues can set specific trading hours applicable only to a specific financial instrument or sub-set of financial instruments.
ESMA revised guidelines on certain aspects of MIFID II suitability requirements
On 23 September 2022, ESMA published its final report and revised guidelines on certain aspects of the suitability requirements under MIFID II. The guidelines were reviewed following: (i) amendments to Commission Delegated Regulation 2017/565 to integrate sustainability factors, risk and preferences into certain organisational requirements and operating conditions for investment firms; (ii) the good and poor practices identified in ESMA’s 2020 Common Supervisory Action on suitability; and (iii) the amendments introduced through the Capital Markets Recovery Package to Article 25(2) of MIFID II.
The changes relate to sustainability preferences and organisational requirements. Feedback to ESMA’s January consultation on the guidelines, together with ESMA’s response, is set out in Annex III to the report. The guidelines will apply six months after they are translated into the official languages of the EU and published on ESMA’s website.
ESMA guidance on market outages
On 26 September 2022, ESMA published a consultation paper on market outages. The consultation seeks feedback on ESMA’s proposed guidance on how trading venues should communicate with market participants in case of an outage.
It sets out ESMA’s expectations on how national competent authorities (NCAs) should ensure that trading venues have appropriate communication protocols in place ensuring the communication to members and participants and the public during an outage. In addition, it includes ESMA’s guidance on how NCAs should ensure that trading venues have arrangements in place to avoid that an outage affects the closing auction, and, where an outage prevents the trading venue from running the closing auction, to ensure that the market is provided with an official closing price.
It also seeks feedback from stakeholders on measures that a trading venue should have in place to ensure that it has the ability to run its closing auction and on whether the lack of a reference price raises any concern in an outage context. Finally, the consultation covers outages on non-equity markets. The consultation closes on 16 December and ESMA will endeavour to publish the final report in Q1 2023.
ESMA reminds firms of the impact of inflation in the context of investment services to retail clients
On 27 September 2022, ESMA published a statement reminding firms to consider inflation and inflation risk when applying relevant MIFID II requirements in the interest of investor protection.
Over the past months inflation rates have risen in the EU, as in the rest of the world, and this growth in inflation has impacted households both in their daily lives and in their investments and investment decisions.
ESMA notes that from an investor protection perspective, this trend poses a risk for retail investors, as some of them will not fully appreciate the link between inflation and financial markets and may not fully understand how considerations on inflation should be factored in when they make saving and investment decisions.
ESMA is therefore issuing this Statement to remind firms of relevant MIFID II requirements as it believes that investment firms may play a role in considering inflation and inflation risk, both when manufacturing and distributing investment products and when providing investment services to retail clients. Investment firms can also help raising clients’ awareness of inflation risk.
ESMA and the national competent authorities (NCAs) will continue to monitor closely financial markets and their participants in the interest safeguarding the stability of the EU’s financial system by enhancing the protection of investors and promoting stable and orderly financial markets.
ESMA organises workshop on post-trade transparency
ESMA is hosting a virtual workshop on post-trade transparency on 11 October 2022, from 9:00 to 17:30, Paris time. This workshop will cover the additional Level 3 guidance on the post-trade transparency information which has to be made public, with particular attention to the reporting fields included in Table 2 of Annex II of RTS 2. Experts will touch upon common aspects to non-equity instruments including bonds, ETCs and ETNs, SFPs, interest rate, credit, FX, commodity, including emission allowances, and equity derivatives and securitised derivatives. The registration closed on 30 September 2022.
Market Abuse
ESMA updated Q&A on MAR
On 23 September 2022, ESMA published an updated version of its Q&A on the Market Abuse Regulation. ESMA has added two Q&A relating to the disclosure of inside information. The first relates to financial guidance and disclosure of inside information (Q5.11). The second discusses market analysts’ expectations and the identification of inside information (Q5.12).
SUSTAINABLE FINANCE
ESMA issues sustainable finance implementation timeline
On 16 September 2022, ESMA updated its sustainable finance implementation timeline, which covers the key pieces of legislation under the EU sustainable finance framework: SFDR, Taxonomy Regulation, Corporate Sustainability Reporting Directive, MIFID, Insurance Distribution Directive, UCITS and AIFMD.
The timeline includes key developments up until 2028. Key dates remaining in 2022 are that on 30 December: (i) Art 7 SFDR disclosures on product-level ‘principle adverse impact’ consideration applies; and (ii) the European Commission is expected to have issued an evaluation of the SFDR.
CySEC DEVELOPMENTS
Circular C526: Common Weaknesses identified during the review of CIF’s Recovery Plans.
On 10 August 2022 CySEC, through the issuance of Circular C526, informed the CIFs that fulfil the criteria of paragraph 4 of the CySEC Directive DI20-01 (regarding the establishment of simplified obligations as to the content and details of their Recovery Plans) (the qualifying CIFs), of the main weaknesses identified during its review of a sample of the Recovery Plans submitted in 2020 by qualifying CIFs.
CySEC identified several common weaknesses and deficiencies across the reviewed sample of submitted Recovery Plans. CySEC reminded qualifying CIFs of further comments and clarifications that should be considered while preparing the Recovery Plans for the year ended 31/12/2021, which are due to be submitted by 30/09/2022.
Announcement: Cyprus Beneficial Ownership Register of Express Trusts and Similar Legal Arrangements (CyTBOR)
CySEC via an announcement on 7 of September 2022 reminded all trustees of express trusts or persons holding equivalent positions in similar legal arrangements of their obligation to provide CyTBOR with the information required under the Directive on Cyprus Beneficial Ownership Register of Express Trusts and Similar Legal Arrangements, the soonest possible and no later than 7 October 2022.
