European Union: EU Technical Standards On The Removal Or Suspension Of Financial Instruments From Trading

On May 24, 2016, a Commission Delegated Regulation outlining the RTS on when financial instruments should be removed or suspended from trading was adopted by the European Commission. The adopted RTS will supplement the revised MiFID, which requires a market operator of a regulated market, multilateral trading facility or organized trading platform to suspend or remove from trading financial instruments which no longer comply with the rules of the trading platform. MiFID II requires that, when a market operator suspends or removes from trading a financial instrument, it must also suspend or remove the derivatives that relate or reference the underlying derivative where necessary to support the objectives of the suspension of the financial instrument. The RTS specify that a market operator of a regulated market and an investment firm, multilateral trading facility or organized trading facility must suspend or remove a derivative from trading where that derivative is related or references only one financial instrument and that instrument has been suspended or removed from trading. The RTS are applicable to derivatives listed in the first Annexure to MiFID II. The list includes: options, futures, swaps, forward rate agreements and any other derivative contracts dealing to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash. The adopted RTS do not apply to derivatives in which the price or value is dependent on multiple price inputs, for example, those that relate to an index or a basket of financial instruments.

The adopted RTS must be approved by the European Parliament and the Council of the European Union and be published in the Official Journal before they can enter into force.

The adopted RTS are available at: http://ec.europa.eu/transparency/regdoc/rep/3/2016/EN/3-2016-3014-EN-F1-1.PDF.

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