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AIMA has concerns which relate to certain aspects of the Consultations, including a removal of potential requirements on Disclosing Market Participants (DMPs) in relation to scripts and cleansing strategies for inside information. AIMA considers that a degree of certainty as to the assessment of a DMP that information is non-inside information, as well as future cleansing for information deemed to be inside information, is extremely important for buy-side participants when deciding whether to accept market soundings.
Without sufficient certainty, it is likely that many buy-side participants will deem risks to be too high for a great number of potential soundings – thus reducing the ability for issuers to sound-out the market, to the detriment of the efficiency of EU primary capital markets.
AIMA would also appreciate explicit clarity from ESMA that it remains possible for legitimate reasons be used as a defence to insider dealing – as per Article 9 of MAR Level 1 – without the need for an accompanying Accepted Market Practice (AMP).
The IMA supports the use of scripts and the standardisation of content as this should deliver efficiency and consistency, as well as the two step process of confirming that the DMP is speaking to the appropriate person, and subsequently getting confirmation of the recipient’s consent to be sounded. However, the IMA notes that detailed requirements regarding the cleansing strategy to be employed by the issuer is no longer required.
The IMA does not support the exclusion of this data, as there are benefits which can be derived by potential investors in understanding the strategy to be employed in cleansing and any associated risks. IMA would support the inclusion of this information as it should deliver further efficiencies in the process. Should investors fail to be cleansed in a timely manner it is likely that this (or the fear of such prolonged inability to trade the stock of certain issuers) would discourage investors from taking part in market soundings. This, as the SMSG notes, would be damaging to the proper functioning of the financial markets, with knock-on implications for the economy of the EU.
Based on MAR Level 1, AFME fundamentally disagrees with the view that a market sounding conducted as proposed is not within a safe harbour. The organization is strongly of the view that investment recommendations, originating from inside the sales or trading department of an investment firm or credit institution expressed to their clients and which are not likely to become publicly available, should not be considered investment recommendations for the purposes of MAR.
Implementing the current proposals without change would have a material impact on investment communications between investment firms and investors with whom they have existing relationships as well as on research firms. Liquidity in some investments would also be impacted. These unintended consequences run contrary to the EU efforts to strengthen SME markets.
AFME is also concerned with the vast amount of personal and private information which is required to be held on insider lists. AFME considers this to be disproportionate to the aims of keeping such a list and further it poses a serious data protection concern. AFME strongly opposes the provisions which require firms to provide their investment research free of charge, where it has been referred to in a non-written recommendation. AFME considers this to be unfair and contrary to commercial practice in all sectors.
EuropeanIssuers believes that the amount and detail of data required by ESMA is disproportionate to the intended effects of ascertaining someone’s identity. Moreover, EuropeanIssuers are strongly concerned with regulatory burdens incurred by issuers of all size to collect, retain and update the information in their systems, which in turn must be adequate and secure and therefore costly, and which could trigger data protection compliance obligations. The contents of such a list should be proportionate and take into account the purpose for which the Insider Lists are required.
EuropeanIssuers suggests that the identification requirements be limited to name, position within the issuer (or adviser), work address and work email address. In all cases, ESMA should also carefully consider the data protection issues for issuers and their advisers in keeping and disclosing such data.
EACB is concerned with the proposal of the ESMA to extend the requirements and standards (e.g. use of a media allowing dissemination throughout the EU) set out in the Transparency Directive (TD) to the issuers of MTF and OTF financial instruments. MTF is typically used by small bank- issuers that have not (by fact or by law) access to regulated markets and act locally (by fact or by law) in a defined territory.
In such cases, the requirements proposed are excessive and do not have any added value for its clients In particular, the use of media allowing dissemination throughout the EU is futile and inefficient for a local bank (issuer) whose clients (investors) live in the same limited territory. For such kind of issuers EACB would consider that it is sufficient to publish inside information both on its website and on that of the market (i.e. MTF).
EACB also considers that the dissemination mechanism of inside information could be adopted on the basis of the proportionality principle in order to avoid producing significant burden and costs for small issuers which trade exclusively their own bonds on such venues.
According to Nasdaq, it is true that an increased scope of the regulation can introduce further possibilities for companies to perform buy backs, i.e. by utilizing liquidity on MTFs. However, fragmented trading and liquidity exists mainly for the largest companies with the most liquid shares and in Nasdaq's experience it is not those companies that find the volume restrictions to be problematic. It is the small companies that have less liquid shares that are traded on a single market place, that find that buying back 25% of ADV will not result in meaningful changes to their capitalization in absolute monetary terms.
By expanding the scope of the safe harbor to include transactions on MTFs, buy backs under the safe harbor regulation will also be enabled for issuers that have their shares issued only on MTFs. This will increase the number of issuers with less liquid shares and can thereby be expected to increase the need for exemptions from the 25% volume restrictions.
Nasdaq, therefore, does not agree with the proposal but would suggest either that the current rules remain or that local Competent Authorities are authorized to grant exemptions from the volume restrictions. If the current rules remain, it would most likely be helpful for market participants if there was a definition or guidance on the meaning of “extreme low liquidity”. It cannot be ruled out that the lack of a clear definition or guidance is one contributing factor for the low use of the possibility to apply for exemptions.
Euronext agrees with ESMA’s view on how to deal with OTC transactions. In addition, Euronext notes that in order for a practice to be considered as an accepted market practice in the OTC space, it should be covered by the same transparency requirements as the ones that would apply to it should it have been performed on a regulated trading venue. Otherwise, the risk is to exempt from the Market Abuse Regulation some practices that yet, because of a lack of transparency, regulators and the market as a whole will have difficulties to monitor, and therefore for which the legitimacy of their exemption from the afore-mentioned framework may be questioned.
If the ESMA were to authorized AMP on OTC markets, those authorized practices on OTC should not have impact on the underlying securities in particular when those underlyings are traded on RMs, MTFs or OTFs, should be aligned with the one of RMs, MTFs or OTFs and should remain exceptional considering the character infrequent, unsystematic of the OTC definition.
According to ISDA, legal certainty of the rules should be ensured (e.g. for market manipulation indicators, especially regarding specifications of legitimate behaviour and intent). Another important issue for ISDA is the coordination with other pieces of legislation and relevant implementation measures and practices, including the interface between MAR and the market abuse regime for European power and gas under Regulation on wholesale energy market integrity and transparency (REMIT). Monitoring overlaps and potential conflicts between MAR and the Markets in financial instruments directive and regulation package (MiFID 2) - and with European Market Infrastructure Regulation (EMIR), e.g. regarding suspicious transactions reporting - is also relevant for ISDA.
With regard to REMIT, ISDA adds that effort should be made to avoid imposing disclosure requirements for inside information via MAR which effectively duplicate existing requirements already in place under REMIT.