01 February 2013

ESMA issues guidelines on market-making and primary dealer exemptions

These Guidelines will support the creation of a level playing field, consistency of market practices and convergence of supervisory practices amongst national securities market regulators across the EU.

The key elements covered by the Guidelines include:

• In order to benefit from the market making exemption on a particular instrument, the market-maker should be a member of a trading venue on which the relevant financial instrument is admitted to trading and conduct market making there;
• For any instrument for which a notification of intent to use the exemption is made, the market-maker should fulfil some general principles. For equities and equity derivatives, the Guidelines specify qualifying criteria to be considered by the authority which received the notification of intent in the assessment on whether to allow the use of the exemption or not;
• The process of notification of the intent to use the exemption and its content, including notification templates, the approach to processing notifications received by relevant competent authorities and the standards that competent authorities should take into account when assessing the notifications received;
• Definition of the relevant competent authority to be notified, in particular a single entry point for notifying entities from third countries; and
• Notifications made before entry into force of the Guidelines will be reviewed within six months after application of the Guidelines.

Competent authorities to whom the guidelines apply should comply by incorporating them into their supervisory practices and ensure application by market participants. The authorities must notify ESMA whether they comply or intend to comply with the guidelines, explaining any reasons for non-compliance.

Steven Maijoor, ESMA Chair, said: “Market-making is an important function in securities markets, these guidelines provide clarity to participants and supervisors on the operation of the exemptions under the Short Selling Regulation. This ensures that market participants can operate knowing that the same criteria are being applied in a consistent manner by authorities across the EU, thereby ensuring a level playing field for all.”

Press release

Full Guidelines

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