MIFID2 / MIFIR

Trading

As part of the EU's MiFID2 Review, on 25 November 2021 the European Commission published legislative proposals to amend MiFID2/MiFIR. Links to relevant documents are below:

• Commission legislative proposal to amend MiFIR
• Commission legislative proposal to amend MiFID2
• A factsheet on the consolidated tape proposals.
• An impact assessment and summary.

The key proposals include:

• ESMA to appoint a single CTP in each asset class
• The share trading obligation (STO) being limited to EEA ISINs (but with trading on third-country venues allowed where the trade is in the local currency)
• The derivatives trading obligation (DTO) to be amended to de-scope small FCs (aligning with EMIR Refit), plus two DTO suspension powers
• Replacing the “double volume cap” to a “single volume cap” of 7% of trades that are executed under the reference price waiver (RPW).
• Prohibiting SIs offering payment for order flow
• CCPs to offer open access for clearing
• The dealing on own account exception for persons accessing a trading venue via DEA to be removed.
• Deletion of RTS 27 best execution reporting requirement

The next step is for the European Parliament and the Council to negotiate a final legislative text on the basis of the proposals - probably around 18 months. The proposals, once finalised, will also require additional delegated acts and technical standards covering the detail.

MiFID2 commodity derivatives – ESMA’s final report on commodity derivatives technical standards

ESMA has published a final report on draft technical standards for commodity derivatives. This follows from its public consultation paper published on 26 May 2021 (ESMA70-156- 4067). These draft technical standards have been developed under the MiFID 2 Amending Directive ((EU) 2021/338), which forms part of the post-COVID-19 MiFID II recovery package – and which introduces significant changes to the MiFID II commodity framework, including to the position limit regime.

In the report:

• ESMA sets out its final proposal for a draft RTS on the application of position limits to commodity derivatives (RTS 21a). Draft RTS 21a, which will be repealing RTS 21, also retains the provisions of RTS 21 that are not impacted by the changes made to the position limit regime and contains additional proposals by ESMA to improve the functioning of the position limits regime based on experiences following the application of MiFID II in January 2018.
• In Part II of the final report, ESMA explains amendments to ITS 4 as a consequence of the exclusion of securitised derivatives from the scope of position limits.
• Part III of the final report contains the draft RTS on position management controls.
• Annex I provides a detailed description of feedback received to the consultation.

ESMA submitted the final report to the European Commission on 19 November 2021. The Commission has three months to decide whether to endorse the draft regulatory and implementing technical standards

Investor Protection

New Q&As

ESMA has published new Q&As on investor protection topics.

Consultation paper – open for public comment

ESMA will hold an open hearing for its Call for Evidence on a number of retail investor protection topics under MiFID II. These views will feed into ESMA’s technical advice to the European Commission (EC) on the development of its strategy for retail investment.

The consultation period will end on 2 January 2022.