1. MIFID II

1.1 ESMA to launch common supervisory action in 2024 on MiFID II sustainability requirements

On 3 October 2023, the European Securities and Markets Authority (ESMA) announced that it will launch a Common Supervisory Action (CSA) with National Competent Authorities (NCAs) in 2024 on the integration of sustainability in firms' suitability assessment and product governance processes in accordance with the Markets in Financial Instruments Directive 2014/65 (EU) (MiFID II).

The CSA follows the coming into effect, on 3 October 2023, of ESMA's updated Guidelines on certain aspects of the MiFID II suitability requirements (MiFID II Suitability Guidelines) and its Guidelines on MiFID II product governance requirements (MiFID II POG Guidelines).

The CSA will assess intermediaries' application of key sustainability requirements which have been in force since 2022 following the amendments to the MiFID II delegated acts1 . The CSA will address matters such as how firms collect information on their clients' suitability preferences and arrangements adopted by firms to categorise investment products with sustainability factors for the suitability assessment.

ESMA's press release on the CSA can be accessed here.

ESMA's updated MiFID II Suitability Guidelines can be accessed here.

ESMA's updated MiFID II POG Guidelines can be accessed here.

1.2 ESMA issues supervisory briefing on effective circuit breaker implementation

On 12 October 2023, ESMA issued a supervisory briefing on circuit breakers, which sets out ESMA's expectations for effective circuit breaker implementation by venues (TVs).

The supervisory briefing aims to promote convergence among NCAs on the methodology of calibration of circuit breakers and ESMA has reiterated that the use of circuit breakers by TVs is to safeguard against market volatility. TVs such as multilateral trading facilities (MTFs) and organised trading facilities (OTFs) are subject to circuit breaker requirements under Article 18(5) of MiFID II.

A copy of ESMA's supervisory briefing can be accessed here.

1.3 ESMA updates its questions and answers document on MiFID II and MiFIR market structures topics

On 13 October 2023, ESMA updated its Questions and Answers document on MiFID II and MiFIR market structures (Market Structures Q&A).

The updates made to the Market Structures Q&A can be located at section six of the Market Structures Q&A, which relates to access to central counterparties (CCPs) and trading venues. More specifically, ESMA added two new questions and answers, including:

  • Question 8 – relating to the extent a trading venue can apply different fee schedules to CCPs under Article 36 of MiFIR; and
  • Question 9 – addressing whether a trading venue that has already granted access to a CCP can charge new fees that were not agreed in the access arrangement.

A copy of the updated Market Structures Q&A can be accessed here.

1.4 Council of the EU approve final compromise texts on proposals to improve MiFID II market data access and transparency

On 18 October 2023, the Council of the European Union (Council of the EU) published notes from its General Secretariat to the Permanent Representatives Committee (COREPER) setting out final compromise texts for the legislative proposals on the Regulation on amendments to the Markets in Financial Instruments Regulation 600/2014 (MiFIR) and the Directive on amendments to MiFID II.

The Council of the EU also published a note (Note) on 18 October 2023 from the General Secretariat of the Council, confirming that COREPER endorses the final compromised texts.

The final compromise texts reflect the provisional political agreement reached between the Council of the EU and the European Parliament in June 2023 and include amendments to MiFIR and MiFID II which relate to improving access to market data and trade transparency. The Regulation on amendments to MiFIR and the Directive on amendments to MiFID II address removing obstacles to the emergence of consolidated tapes, prohibiting receiving payments for forwarding client orders, enhancing data transparency and optimising trading obligations.

The next step is for the final compromised texts to be formally approved by the European Parliament's Committee on Economic and Monetary Affairs (ECON).

A copy of the Note can be accessed here.

1.5 ESMA's updated Annex to transparency opinion setting out third-country trading venues under the MiFIR post-trade transparency regime

On 19 October 2023, the Annex to ESMA's published opinion to clarify whether post-trade transparency requirements in MiFIR apply also to transactions concluded on a third-country trading venue (Transparency Opinion) was updated.

The Annex to the Transparency Opinion sets out a list of trading venues that meet the criteria to be classified as a third-country trading venues for the purposes of the MiFIR post-trade transparency regime.

A copy of the updated Annex can be accessed here.

A copy of the Transparency Opinion can be accessed here.

1.6 ESMA updates its questions and answers document on MiFID II and MiFIR transparency topics

On 27 October 2023, ESMA updated its Questions and Answers (Q&As) document on MiFID II and MiFIR transparency topics (Transparency Topics Q&A). The Q&As in respect of the following topics have been updated:

  • General Q&As on transparency topics;
  • Equity transparency;
  • Non-equity transparency;
  • Pre-trade transparency waivers;
  • Data reporting services providers; and
  • Third country issues.

Most of the updates made to the Transparency Topics Q&A relate to various Q&As being moved to ESMA's Manual of post-trade transparency under MiFID II / MiFIR, which was published on 10 July 2023.

The Transparency Topics Q&A also deleted a Q&A on the minimum size of orders held in an order management facility for non-equity financial instruments as this requirement is provided for by the amended regulatory technical standards2 as regards certain transparency requirements applicable to transactions in non-equity instruments (amended RTS 2), which has applied since 5 June 2023.

A copy of the updated Transparency Topics Q&A can be accessed here.

A copy of ESMA's Manual of post-trade transparency under MiFID II / MiFIR can be accessed here.

A copy of the amended RTS 2 can be accessed here.

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Footnotes

1. Commission Delegated Directive (EU) 2017/593 and Commission Delegated Regulation (EU) 2017/565

2. Commission Delegated Regulation (EU) 2023/945 of 17 January 2023 amending the regulatory technical standards laid down in Delegated Regulation (EU) 2017/583

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