12 April 2018

ESMA publishes a negative opinion on an accepted market practice on liquidity contracts proposed by the French AMF

ESMA published an opinion on the Accepted Market Practice notified by the French Autorité des Marchés Financiers, which replaces the AMP under the Market Abuse Directive established in March 2005.

This AMP refers to liquidity contracts by which a credit institution or an investment firm (financial intermediary) provides quotes at certain French trading venues on behalf of the issuer, with a view to enhancing the liquidity of a particular share and its regular trading.

The regular functioning of this AMP implies that these liquidity contracts should operate according to limits on the resources allocated to them and on the prices and volumes quoted. However, this AMP also foresees that for an initial two-year transitional period both issuers and financial intermediaries may not be bound by those limits in case not defined “market conditions” occur. Contrary to issuers, financial intermediaries are not obliged to disclose publicly when they are operating out of those limits.

Whereas ESMA does not object to the regular functioning of the AMP, it considers that permitting liquidity contracts to operate during the transitional period out of boundaries in terms of resources, price or volume and, in the case of financial intermediaries, without providing transparency to the market, would not meet the requirements set out in MAR.

The proposed AMP also departs from some of the elements specified by ESMA in its Opinion on liquidity contracts, issued in April 2017.

Following the publication by ESMA of the negative opinion, the AMF is expected to make a final decision on the AMP in the near future. According to MAR, in case a national competent authority establishes an AMP contrary to the opinion of ESMA, it shall publish on its website a notice setting out in full its reasons for doing so, including why the AMP does not threaten market confidence.

Full opinion

The AMF notes this negative opinion concerning the project to introduce a new accepted market practice governing liquidity contracts

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