EC public hearing on MAD review: highly interlinked with MiFID and EMiR.
06 July 2010
DG MARKT director highlighted that the scope of the directive should be extended to OTC derivatives markets. The debate focused on ensuring comprehensive and appropriate coverage of derivatives markets in the MAD review.
Jonathan Faull, on his first public intervention as DG MARKT director, highlighted that the scope of the directive should be extended to OTC derivatives markets so that MAD would allow supervisors to act if manipulative transactions with OTC derivatives took place.
ECON Chairwomen Sharon Bowles said that the MAD review should focus on the following three main points:
· Transparency, because some markets need to provide more information to regulators as is the case with the OTC derivatives market.
· Clarity, because there is a need to provide better definitions, for instance the definition of MTFs.
· Harmonization of sanctions among Member States so as to avoid regulatory arbitrage.
Carlos Tavares, Vice-Chair of CESR, presented several real cases and said that Member States haven’t applied the MAD homogenously. Considerable divergence exists among Member States concerning the disclosure to the public of measures or sanction to be imposed due to an infringement. The “name and shame”method could be a very efficient deterrence mechanism and should be considered in the MAD review, he said.
The debate focused on ensuring comprehensive and appropriate coverage of derivatives markets in the MAD review. The three panellists, Nadège Jassaud from Banque de France, Alexander Justham FSA Director of the market division and Stephen J. Obie from the CFTC Division of Enforcement presented their views on the subject.
They emphasized that the OTC derivative markets will be regulated not only by the MAD review , but also by EMIR and MiFID. Alexander Justham said that the MAD review should have the widest possible scope so to make sure all derivatives are regulated. He also stressed that policy makers should make a clear distinction between speculation and manipulation. The MAD is about manipulation of the market and not speculation, even though if in some cases speculation can imply market manipulation.
Regarding the US financial bill, Stephen J. Obie said that the CFTC will now have more powers to check if market manipulation or attempt of market manipulation is taking place in the OTC derivatives markets.
The three panelists also debated what role “financial rumors” have on market manipulation. They agreed that sometimes the manipulation of the market is stirred by journalists. Stephen J. Obie used the example of a trader passing information to a journalist in order to manipulate the price of a share. Everybody agreed that to proof that a rumor has been launched to manipulate the market is very difficult.
© European Commission
