Legal and regulatory quarterly update for investment firms: April – June 2022 – Commodities/Derivatives/Exchanges

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1. MIFID II

1.1 ESMA postpones the review of MiFIR RTS 2 on the transparency of exchanges

On 1 April 2022, the European Securities and Markets Authority (ESMA) issued a press release announcing that it has postponed the annual review of Commission Delegated Regulation (EU) 2017/583 (RTS 2) on non-capital transparency.

The decision to postpone has been taken because the ongoing review by the European Commission of the provisions relating to the transparency of trading in the Regulation on markets in financial instruments (600/2014) (MiFIR) is likely to have a significant impact on the instruments under review.

RTS 2 requires ESMA to carry out an annual review before July 30. One element of this review is to assess trading percentiles determining financial instrument-specific pre-trade sizes (SSTI) threshold for bonds and derivatives. The MiFIR review proposes to remove the SSTI threshold, making this part of the annual review superfluous.

ESMA will resume submission of the RTS 2 annual report in 2023.

A copy of the press release is available here.

1.2 ESMA updates questions and answers on MiFIR data reports

On April 1, 2022, ESMA published an updated version of its questions and answers on data reporting under MiFIR.

ESMA has modified the following questions and answers:

  • Q&A 2 on Legal Entity Identifier (LEI) of the issuer;

  • Q&A 4 on instrument identification codes and the underlying instrument; and

  • Q&A 21 on reporting par value per unit and minimum traded value.

ESMA last updated the Q&A in July 2021.

A copy of the questions and answers on the updated MiFIR data reports is accessible here.

1.3 Guidance – On certain aspects of the suitability and execution requirements only of MiFID II

On April 12, 2022, ESMA published 13 guidelines on certain aspects of the suitability and execution only requirements provided for in Directive 2014/65/EU (MiFID II). The guidelines aim to clarify this area, to ensure common and consistent application of certain articles of MiFID II and to promote greater convergence in the application and supervisory approaches of MiFID II.

The Guidelines are separated into four categories:

  • Information to clients on the purpose of the suitability assessment and execution only;

  • Know your customer and know your product;

  • Match customers with appropriate products;

  • Other Related Requirements.

ESMA anticipates a strengthening of investor protection, helping to ensure that companies comply with regulatory standards through these guidelines.

A copy of the Guidelines is available here.

1.4 Commission Delegated Regulation (EU) 2022/629 of 12 January 2022 amending MiFID II/MiFIR RTS 2 is published in the Official Journal of the EU

On 13 April 2022, Commission Delegated Regulation (EU) 2022/629 of 12 January 2022 amending the regulatory technical standards established by Delegated Regulation (EU) 2017/583 (RTS 2) was published in the Official Journal of the EU (OJ).

The Delegated Regulation makes changes to Article 17 of RTS 2 relating to the adjustment of liquidity thresholds and transaction percentiles used to determine the SSTI applicable to certain instruments other than shares, under MiFIR.

The delegated regulation entered into force on May 3, 2022, 20 days after its publication in the Official Journal.

A copy of the delegated regulations is available here.

1.5 Technical advice from ESMA on retail investor protection topics

On April 29, 2022, ESMA advised the European Commission on certain aspects relating to the protection of retail investors. The final report contains technical advice on certain investor protection topics under MiFID II and presents proposals that will make it easier for investors to obtain the key information they need to make informed investment decisions, while protecting them from aggressive marketing. harmful techniques and practices.

The proposals aim to maintain a high level of investor protection, while ensuring that retail investors can benefit from digitalisation opportunities. Focus on (i) disclosures; (ii) digital disclosures; and (iii) digital tools and channels, recommendations include:

  • require machine-readable informational materials to facilitate the development of publicly accessible searchable databases;

  • address information overload by offering to define what is vital information and using digital techniques such as information overlay;

  • development of a standard European cost and charge information format and alignment of information provided under MiFID and the PRIIPs Key Information Document (CHILD);

  • the possibility for national competent authorities and ESMA to require companies to use risk warnings for specific financial instruments;

  • address aggressive marketing communications; and

  • address issues related to deceptive social media marketing campaigns and the use of online engagement practices, such as the use of gamification techniques by companies or third parties.

ESMA’s opinion is accessible here.

1.6 ESMA publishes revised MiFID II framework on best execution reports by investment firms

On 16 May 2022, ESMA published its final report on its review of the MiFID II framework on best execution reports by investment firms (Report). The report follows ESMA’s publication of a consultation document on September 24, 2021, seeking stakeholder feedback on proposed improvements to the MiFID II framework on best execution reports.

The MiFID II framework requires execution venues and investment firms to publish periodic data on the quality of execution.

ESMA has adopted regulatory technical standards (RTS) in this area applicable to venues of execution[CommissionDelegatedRegulation(EU)2017/575([règlementdélégué(UE)2017/575delaCommission(RTS 27) and investment firms (Commission Delegated Regulation(EU)2017/576([règlementdélégué(UE)2017/576delaCommission(RTS 28)). ESMA has suspended ongoing work on RTS 27, following the publication of the European Commission’s proposals for the revision of the MiFID II/MiFIR framework. Therefore, the report only addresses best execution requirements for investment firms.

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The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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