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16 December 2016

ESMA agrees with the MAR on liquidity contracts proposed by Spanish regulator CNMV


This Accepted Market Practice refers to liquidity contracts by which a credit institution or investment firm (financial intermediary) quotes in the equity market on behalf of the issuer, with a view of reinforcing liquidity in that share.

The practice would be available for all issuers. The objective of the practice is to increase or maintain the liquidity of a particular share. In that respect, it would ultimately benefit investors, in the sense that the likelihood of finding a counterparty for entering or exiting a position in that share would increase.

ESMA considers that the proposed Accepted Market Practice (AMP) on liquidity contracts is compatible with MAR and with its technical standard on AMPs, and contains various mechanisms to limit the threat to market confidence. However, ESMA is nevertheless inviting the CNMV to consider whether it could address in the AMP or in a future revision of it the introduction of maximum monetary amounts capping the resources to be allocated to the execution of liquidity contract, distinguishing between the different liquidity categories of shares and the expectation that the financial intermediary performing the liquidity contract would in normal conditions be present on both sides of the order book.

Full opinion



© ESMA


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