Concerns about Market Abuse Level 2 Regulation

January 11, 2016

Surveillance systems – a partial delay of MAR is necessary
According to MAR Article 16 (2) any person professionally arranging or executing transactions shall establish and maintain effective arrangements, systems and procedures to detect and report suspicious orders and transactions.

In order to ensure consistent harmonization of Article 16, ESMA shall develop draft regulatory technical standards (RTS) to determine appropriate arrangements, systems and procedures for a person to comply with the requirements in Article 16 (2).

The draft RTS was published 28 September 2015 by ESMA. However, the final RTS are not yet published by the Commission and are not expected published until the beginning of 2016.

The requirements set out in the RTS entails an increased number of indicators of market abuse/insider trading which requires new surveillance models which - combined with the extended scope of MAR in terms of asset classes and venues/OTC-trading - may imply a need for setting up and implementing new surveillance systems or develop existing systems. As recognized by the Commission in its non paper on Delay of MiFID II application this is a comprehensive exercise and hence the entities should at least be afforded an implementation period of 12-18 months after publication of the relevant RTS.  Thus, it would be difficult or almost impossible for entities to develop and implement such systems based on a draft RTS before 3 July 2016.

Based on the above we strongly encourage the Commission to delay the application of article 16 (2) in MAR. We note that despite a delay it is still possible to carry out sound market surveillance.

Market sounding – no legal basis to issue RTS (I)
According to article 4 (2) the disclosing market participants shall draw up a list of any potential investors that have informed them, that they do not wish to receive market soundings, in relation to either all potential transactions or particular types of potential transactions.

We find that ESMA is not empowered to develop draft regulatory technical standards which require that the market participant shall draw up such a list, cf. article 11 (9) in MAR.

Furthermore, we find that such a list is not useful and entails unnecessary administrative burdens for disclosing market participants. Sound business behavior implies that no contact is made to the potential investors that have informed the disclosing market participants that they do not wish to receive market soundings. Thus, the requirement is redundant.

We therefore encourage the Commission not to issue regulatory standards which entail a requirement to produce the above mentioned lists.

Market sounding – no legal basis to issue RTS (II)
According to article 4 cf. article 1 in the RTS regarding markets sounding, a disclosing market participant shall provide a standard set of information to persons receiving market sounding, even though the market sounding will not involve the disclosure of inside information.

It is our assessment that the Commission is not empowered cf. MAR article 11 (9) to issue RTS which require a disclosing market participant to provide information to persons receiving market sounding in cases that does not involve the disclosure of inside information.

We therefore encourage the Commission not to issue regulatory standards which entail a requirement to provide information in cases that does not involve the disclosure of inside information.

Insider lists – redundant information
According to ESMA’s template 1 regarding insider list, telephone numbers and birth surname should be indicated.

As for the telephone numbers, we find that it would be burdensome to obtain such information and keep the information regarding telephone numbers updated – especially in relation to insiders outside the issuer. Furthermore, we find it impossible to verify the information given.

As for the birth surname, it should at least be limited to circumstances where the persons do not have a unique identification number.

Finally we find that such information is not essential in regard to detecting potential market abuse nor to an assessment whether an investigation should be opened by the competent authority.

Consequently, we encourage the Commission not to require information regarding telephone numbers and birth surname where a unique identification number is available.

References in MAR to MiFID II
Pursuant to Article 39 (4) in MAR references in MAR to MiFID II shall, before 3 January 2017, be read as references to MiFID I in accordance with the correlation table set out in Annex IV to MiFID II in so far as that correlation table contains provisions referring to MiFID I.

Further it follows from Article 39 (4) that when reference in the provisions of MAR is made to OTFs, SME growth markets, emission allowances or auctioned products based thereon, those provisions shall not apply to OTFs, SME growth markets, emission allowances or auctioned products based thereon until 3 January 2017.

The date of 3 January 2017 refers to the current application date of MiFID II, cf. Article 93 (1) of MiFID II.

Should the application of MiFID II be postponed then we strongly encourage the Commission to amend the reference date (3 January 2017) in Article 39 (4) in MAR correspondingly.

 

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