|
|
We submitted our draft MiFID II technical rules, 42 in total, to the Commission in 2015 who have asked us to amend three standards: those covering transparency for trades in bond and derivatives, position limits for commodity derivatives, and the ancillary activity exemption which is about how to quantify whether a non-financial firm is doing so much financial activity it should be authorised as a financial firm.
While we have not seen the final endorsements, I expect that the Commission will endorse the overwhelming majority without amendment which, given the complexity and breadth of MiFID II, is a great achievement. In addition, let me also emphasise that the Commission followed our technical advice to a very large extent when producing its delegated acts which were published recently.
Still, there have been a couple of anomalies to the process. The clock for an endorsement decision should have stopped at the end of December, three months after we sent most rules to the Commission. However, we only received the official notification on 20 April that three of our MiFID II standards required amendment. I use the word ‘official’ because we initially received letters from the Commission requesting amendments to three technical standards in March and it was unclear to us at the time whether these formed part of the process. We sought clarification from the Commission which resulted in the official letters in April. Our six week period to respond started on 20 April which means we have to revert to the Commission on these three standards by 2 June.
However, we have deviated on one point from the Commission’s proposal regarding bond transparency: how the phase-in of the transparency requirements should work.
The Commission proposed the standards should set the liquidity criteria for the first year only and ESMA should then conduct an annual assessment to determine whether and what adjustment should be made. This annual assessment is now included considering the general concerns about bond market liquidity. In the case of a favourable assessment, meaning the criteria could be tightened so that more bonds are captured by the transparency requirements, ESMA would have to amend the existing standard and so the whole regular legislative procedure for changing the rules would kick in.
I want to stress that overall, my Board supports the more cautious transparency regime suggested by the Commission. However, we have proposed that the phase-in, including the intended annual assessment of liquidity, should be included in the technical standard itself from the outset, rather than after an annual assessment and, in the case of a positive outcome, a request to change the technical standard. We believe our approach gives clarity to all involved, and implements the wishes of the co-legislators to bring meaningful transparency to the bond market. Equally, the liquidity assessments are of a technical nature, and going through multiple legislative processes will imply bigger resource implications for all involved.
Looking to the very near future there is of course the UK referendum, now less than a month away. I am often asked for ESMA’s view on the referendum because, after all, we are the EU authority for securities markets and the UK is the EU’s largest capital market, as well as being a key international player, it also possesses large amounts of expertise and experience which is of enormous value to us.
Like everyone else, I am awaiting the result of the referendum and that decision rests with the UK voters. As part of our remit on financial stability, we are monitoring securities markets for any potential impacts related to the upcoming referendum and as a public authority we are engaged in scenario planning related to the referendum’s potential outcome.
Let me make one additional remark from a securities markets perspective, while fully recognising that the referendum is about much more than that. The Capital Markets Union is all about creating size, and the benefits this will bring, like more competition and more choice. Needless to say, that we need all 28 national capital markets, and especially the biggest one, to make the CMU a success.