ESMA’s Role in the new EU framework
ESMA has two key aspects to its mission as an organisation, which are: the building of a “single rulebook” for the regulation of the EU’s financial markets and ensuring its consistent application at national level. While this is an ambitious mission, presenting significant challenges, I feel that ESMA has already made some substantial progress in meeting the challenges in both these areas over its first 16 months of existence.
Development of a Single Rulebook
In terms of the development of a single rulebook for Europe, ESMA took on its new role as EU securities markets standard-setter with clear responsibilities for the development of technical standards and advice for new, or soon to be revised, pieces of legislation. Over the last year, we not only produced the first technical standards (for credit rating agencies (CRAs) and short selling), but also conducted significant preparatory work for the enormous task of devising the standards for the OTC derivatives markets (under EMIR) this year. We provided advice to the Commission for secondary legislation in the areas of prospectuses and alternative investment funds under AIFMD. Furthermore, we used our powers to issue guidelines and recommendations to enhance the regulatory regime on "Systems and controls in an automated trading environment", as well as on "regulatory framework for ETFs and other UCITS" that will be published by ESMA in June.
Supervisory Convergence
ESMA also conducts peer reviews of national authorities’ activities, which we publish. These reviews look at such elements as the degree of convergence reached in the application of EU law and in its enforcement. One area which ESMA has recently conducted a peer review on is market abuse and the use of sanctions in this area.
Key priorities for 2012
The introduction of new and the overhaul of existing legislation will be a key challenge for ESMA this year. ESMA will work on establishing harmonised binding implementing measures in different areas such as: OTC derivatives (EMIR), investment funds (UCITS), alternative fund managers (AIFMD), and issuers (Prospectus directive). EMIR in particular will dominate our agenda for the next six months, with a consultation paper in June and final standards due to be delivered by end September.
In addition, ESMA will provide advice and support on legislation being introduced and debated by Council and Parliament, including MiFID/MiFIR, MAD/MAR, CSD, Venture capital etc. We will need to start conducting some preparatory work in many of these areas, as the issues ESMA is likely to have to work on (once the Level 1 legislative process is completed) are not only numerous but often technically complex and difficult. ESMA will want to collect information and data, for example to support its future work in areas such as non-equity transparency under MiFID/MiFIR.
On the supervision side, 2012 will be the first year in which ESMA will fully exercise its duties on CRAs and - as I already mentioned - needs to prepare itself also to take up supervisory responsibilities for Trade Repositories. ESMA will also need to prepare for the work on supervisory colleges which will be established in 2013 for the regulation of cross-border central counterparties under the OTC derivatives legislation. The reach and impact of these institutions operating in one country could dramatically affect investors and intermediaries of other countries. ESMA will play, in this framework, a coordination and a mediation role if needed.
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