1. MIFID II
1.1 ESMA postpones review of MiFIR RTS 2 on trade transparency
On 1 April 2022, the European Securities and Markets Authority (ESMA) published a press release announcing that it has postponed the annual review of Commission Delegated Regulation (EU) 2017/583 (RTS 2) on non-equity transparency.
The decision to postpone was taken because the European Commission's ongoing review of trade transparency provisions in the Markets in Financial Instruments Regulation (600/2014) (MiFIR) is likely to have a significant impact on the instruments subject to review.
RTS 2 requires ESMA to perform an annual review by 30 July. One element of this review is assessing the trade percentiles determining the pre-trade sizes specific to the financial instrument (SSTI) threshold for bonds and derivatives. The MiFIR review proposes to remove the SSTI threshold, making this part of the annual review redundant.
ESMA will resume the submission of the annual RTS 2 report in 2023.
A copy of the Press Release can be accessed here.
1.2 ESMA updates MiFIR data reporting Q&As
On 1 April 2022, ESMA published an updated version of its Q&As on data reporting under MiFIR.
ESMA has amended the following Q&As:
- Q&A 2 on the legal entity identifier (LEI) of the issuer;
- Q&A 4 on instrument identification codes and the underlying instrument; and
- Q&A 21 on the reporting of nominal value per unit and minimum traded value.
ESMA last updated the Q&As in July 2021.
A copy of the updated MiFIR data reporting Q&As can be accessed here.
1.3 Guidelines - On certain aspects of the MiFID II appropriateness and execution-only requirements
On 12 April 2022, ESMA published 13 guidelines on certain aspects of the appropriateness and execution-only requirements under Directive 2014/65/EU (MiFID II). The guidelines intend to provide clarity in this area, to ensure common and consistent application of certain MiFID II articles, and to promote greater convergence in the application of, and supervisory approaches, to MiFID II.
The Guidelines are separated into four categories:
- Information to Clients About the Purpose of the Appropriateness Assessment and About Execution-Only;
- Know Your Client and Know Your Product;
- Matching Clients with Appropriate Products;
- Other Related Requirements.
ESMA anticipates a strengthening of investor protection, by helping to ensure that firms comply with regulatory standards through these guidelines.
A copy of the Guidelines can be accessed 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 laid down in Delegated Regulation (EU) 2017/583 (RTS 2) was published in the Official Journal of the EU (OJ).
The Delegated Regulation makes amendments to Article 17 of RTS 2 relating to the adjustment of liquidity thresholds and trade percentiles used to determine the SSTI applicable to certain non-equity instruments, under MiFIR.
The Delegated Regulation came into force on 3 May 2022, 20 days following its publication in the OJ.
A copy of the Delegated Regulation can be accessed here.
1.5 ESMA technical advice on retail investor protection topics
On 29 April 2022, ESMA advised the European Commission on certain aspects relating to retail investor protection. The final report contains the technical advice in relation to certain investor protection topics under MiFID II and puts forward proposals that will make it easier for investors to get the key information they need to make well-informed investment decisions, whilst also protecting them from aggressive marketing techniques and detrimental practices.
The proposals aim to maintain a high level of investor protection, while ensuring that retail investors can benefit from digitalisation opportunities. Focusing on (i) disclosures; (ii) digital disclosures; and (iii) digital tools and channels, the recommendations include:
- requiring machine readability of disclosure documents to facilitate the development of searchable databases available to the public;
- addressing information overload by proposing to define what is vital information and by using digital techniques such as layering of information;
- development of a standard EU format of information on costs and charges and aligning the disclosures under MiFID and the PRIIPs Key Information Document (KID);
- the possibility for national competent authorities and ESMA to impose on firms the use of risk warnings for specific financial instruments;
- addressing aggressive marketing communications; and
- addressing issues related to misleading marketing campaigns on social media and the use of online engagement practices, such as the use of gamification techniques by firms or third parties.
The ESMA advice can be accessed here.
1.6 ESMA publishes review of the 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 publication by ESMA of a consultation paper, on 24 September 2021, seeking input from stakeholders on proposals for 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 execution venues (Commission Delegated Regulation (EU) 2017/575 (RTS 27) and investment firms (Commission Delegated Regulation (EU) 2017/576 (RTS 28)). ESMA has put on hold ongoing work relating to RTS 27, following the publication of the European Commission's proposals for the review of the MiFID II/MiFIR framework. Therefore, the Report addresses only the best execution requirements for investment firms.
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