Markets in Financial Instruments Directive ("MiFID")

(i) ESMA publishes Q&A on contracts for difference and other speculative products

On 25 July 2016, the European Securities and Markets Authority ("ESMA") published an updated questions and answers document (the "Q&A") on the application of MiFID to the marketing and sale of financial contracts for difference ("CFDs") and other speculative products to retail clients.

The Q&A includes nine new questions and answers, which address the following topics:

  • The information provided to clients and potential clients about how CFDs and other speculative products work and the risks involved, including marketing communications;
  • The assessment of appropriateness when offering CFDs or other speculative products to retail investors; and
  • Factors for national competent authorities ("NCAs") to take into account when considering commercial arrangements between two authorised firms that result in the offer of CFDs or other speculative products to retail clients.

The purpose of the Q&A is to promote common supervisory approaches and practices in the application of MiFID and its implementing measures to key aspects that are relevant when CFDs and other speculative products are sold to retail clients by providing responses to questions identified by NCAs in relation to practical aspects of the day-to-day supervision of firms involved in offering these products.

A copy of the Q&A is available at the following link:

ESMA also published a warning about the sale of CFDs, binary options and other speculative products to retail investors who are unaware of the risks associated with such products which can be found at the following link:

Markets in Financial Instruments Directive II ("MiFID II")

(i) ESMA publishes Discussion Paper on Mandatory Trade Execution Obligations for OTC Derivatives under MiFIR

On 20 September 2016, ESMA published a discussion paper (the "Discussion Paper") on the trading obligations for derivatives under the Markets in Financial Instruments Regulation (Regulation (EU) 600/2014) ("MiFIR"). Under MiFIR certain derivatives will be required to be concluded on a regulated market, multilateral trading facility, organised trading facility or a trading venue in a third country that is declared equivalent under MiFIR (the "Trading Obligation").

MiFIR restricts the Trading Obligation to apply only to classes of derivatives that are: (i) admitted to trading or traded on at least one trading venue (the Trading Venue Test); and (ii) sufficiently liquid and have sufficient third-party buying and selling interest (the Liquidity Test).

The Discussion Paper is seeking feedback from stakeholders on the options put forward by ESMA on how to calibrate the Trading Obligation. The Trading Obligation is closely linked to the clearing obligation provided for in the European Markets Infrastructure Regulation (Regulation (EU) 648/2012) ("EMIR"); once a class of derivatives needs to be centrally cleared under EMIR, ESMA must then determine whether these derivatives should be subject to the Trading Obligation.

Comments on the Discussion Paper must be submitted to ESMA by 21 November 2016. ESMA expects to publish a further consultation paper in the first quarter of 2017, and to submit draft technical standards to the European Commission in mid-2017.

The Discussion Paper is available at this link:

(ii) European Commission publishes updated table showing the state of play of technical standards under MiFID II

On 14 September 2016, the European Commission published an updated table (the "Table") showing the state of play of technical standards under MiFID I, MiFID II and MiFIR. Several of the technical standards are awaiting finalisation or a corrigendum before being published in the Official Journal of the EU.

The Table is available at this link:

(iii) European Commission adopts MiFID II Delegated Regulations

On 14 July 2016, the European Commission adopted several delegated regulations to supplement MiIFID II and MiFIR, respectively (the "Delegated Regulations").

The Delegated Regulations adopted by the European Commission include the following:

  • Exchange of information between competent authorities (which specifies the information to be exchanged between regulators for these activities, and covers information requests with respect to investment firms, credit institutions and also natural or legal persons);
  • Requirements for authorisation (which sets out the authorisation requirements for MiFID firms);
  • Tick size (which details the tick size regimes for shares, deposit receipts, exchange-traded funds, certificates and other similar financial instruments);
  • Data standards for financial instrument reference data for the purpose of transaction reporting (which specifies the data standards and formats for the reference data to be provided, and includes a table of details to be reported in the annex accompanying the regulation);
  • Information for registration of third-country firms (which specifies the information necessary for third-country firm registrations (including full name, contact details, website and details on the investment services and or activities to be performed));
  • Organisational requirements of trading venues; (specifies the organisational requirements for regulated markets, multilateral trading facilities and organised trading facilities that enable algorithmic trading through their systems);
  • Transparency obligations in respect of trading venues and investment firms with respect to shares, depository receipts, exchange-traded funds, certificates and other similar instruments (which sets out pre and post trade requirements for equity instruments); and
  • Transparency obligations in respect of bonds, structured finance products, emissions allowances and derivatives (which sets out pre- and post-trade transparency requirements for non-equity instruments).

If neither the Council of the EU or the European Parliament objects, the Delegated Regulations will enter into force 20 days after their publication in the Official Journal of the EU and will apply from 3 January 2018.

(iv) Public Consultation on national discretions in MiFID II incorporating elements of the Insurance Distribution Directive ("IDD")

On 6 July 2016, the Department of Finance published its Public Consultation on Transposition of MiFID II (the "Consultation"). The Consultation, invited all interested parties to make submissions based on national discretions on various aspects of MiFID II and the IDD.

The Consultation closed on 21 September 2016. The views expressed in this consultation process will be considered by the Minister for Finance and his officials in the context of the transposition of MiFID 2 - and to an extent the IDD - into Irish law. In total there were nine questions contained in the Consultation. The questions related to the following topics:

  • The exemption from MiFID for certain fund administrators and retail investment intermediaries;
  • The requirement to maintain the requirement that all investment firms be covered by the investor compensation scheme;
  • The requirements relating to conflicts of interest;
  • The rules relating to client order handling;
  • Whether third country firms should be required to establish a branch when providing investment services to retail clients;
  • Whether investment firms should be allowed to impose higher fees in respect of cancelled orders;
  • The designation of the Central Bank as the competent authority for MiIFD II;
  • Sanctions for breaches of the MiFID rules; and
  • Any other issues relating to the transposition of MiIFD II which have not been addressed in the Consultation.

Please see link below for a copy of the Consultation;

Capital Requirements Directive ("CRD IV")

(i) European Commission issues call for advice to the EBA on the prudential requirements applicable to investment firms

On 6 July 2016, the European Banking Authority ("EBA") published a call for advice dated 13 June 2016 that it received from the European Commission relating to the prudential requirements applicable to investment firms under the Capital Requirements Regulation (Regulation 575/2013) ("CRR") and CRD IV (the "Call for Advice").

The EBA provided a report to the European Commission on this matter in December 2015 and the European Commission has requested that the EBA provide further technical advice on some of the high level recommendations set out in the December 2015 report. The European Commission has asked the EBA to provide advice on the following:

  • The criteria and thresholds for each of the three proposed classes of investment firm (i.e. (a) systematic "bank-like" firms; (b) a middle category for the majority of firms that are note systematic but do pose risks and therefore should be subject to a less complex prudential regime; and (c) small firms which are not interconnected and which should be subject to a very simple regime to cater for wind-down;
  • The design and calibration of all relevant aspects of a new prudential regime for the three proposed classes of investment firm. This is to include advice on whether class one investment firms should be subject to the same rules as banks, and whether the new regime could be adapted to be suitable for specialised commodity derivatives firms;
  • The application of the CRD IV remuneration requirements to the different proposed classes of investment firm, and whether the proposed new classes would affect the applicability of the CRD IV corporate governance rules; and
  • Any other issues or inconsistencies that EU competent authorities may have identified in implementing the rules relating to investment firms. The EBA is to suggest how to rectify any issues identified and how to clarify terminology used.

In preparing the advice, the EBA shall consult with ESMA, as it did with the December 2015 report.

A copy of the Call for Advice is available at the following link:

On 15 July 2016, the EBA launched a data collection aimed at supporting the response to the Call for Advice. For the purpose of this data collection, the EBA published templates and instructions which are addressed to MiFID investment firms and to UCITS/AIFMD firms that conduct MiFID activities or services. The templates should be filled in and submitted to the respective national competent authorities ("NCAs") by 7 October 2016.

Copies of the templates and instructions published by the EBA may be accessed via the following link:

(ii) European Commission outlines topics for forthcoming CRD IV review and indicates further proposals are likely in second half of 2018

On 7 July 2016, the European Commission's expert group on banking, payments and insurance published the minutes of a meeting held on 26 April 2016 on bank regulation and supervision (the "Meeting") during which the expert group discussed the preparations for the European Commission's forthcoming review of, and proposed amendments to, the CRR and CRD IV.

The Directorate-General for Financial Stability, Financial Services and Capital Markets Union ("DG FISMA") presented the envisaged timeframe for the review and the proposal to amend the CRR and CRD IV together with the topics that would be included in the proposal. It further indicated that it would only conduct targeted consultations on very specific issues that would be addressed in the proposal, as many of the broader issues have already been publicly consulted upon either by the European Commission or by other organisations.

Following questioning from expert group members, DG FISMA also confirmed that the reviews of risk-weighted assets and the operational risk framework, being carried out by the Basel Committee on Banking Supervision ("BCBS") are on-going and will only be completed towards the end of 2016. Accordingly, DG FISMA confirmed that the results would not be included in the European Commission's CRD IV amendment proposal and that these topics will be dealt with in a subsequent proposal, which DG FISMA envisages will be put forward in the second half of 2018 at the earliest.

Similarly, the work being carried out by BCBS on leverage ratio buffers and review of the macroprudential framework is on-going and given the lack of agreement on leverage ratio buffers, DG FISMA does not expect to include them in the European Commission's CRD IV amendment proposal. It also indicated that it does not envisage including the results of the macroprudential framework review in the proposal.

A copy of the minutes of the Meeting are available at the link below:

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