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February 25, 2020 TO: ICI Global Members SUBJECTS: MiFID, EMIR, AIFMD, UCITS V RE: European Commission Issues Consultation on MiFID II/MiFIR
On February 17, 2020, the European Commission (Commission) launched a consultation on the review of the MiFID II/MiFIR[1] regulatory framework, with comments due by April 20 (Consultation).[2] The wide-ranging consultation covers a broad spectrum of issues and concerns that have arisen since MiFID II/MiFIR went into effect over two years ago. Recently, the European Securities and Markets Authority (ESMA) has also been consulting on the functioning of certain aspects of the MiFID II/MiFIR framework. Together, the results of these consultations will inform the review reports the Commission is required to present to the European Parliament and Council, and we expect legislative proposals based on these reviews in the third quarter of 2020.
The Consultation is comprised of three sections with 94 questions (and sub-questions). Section 1 contains general questions on the overall functioning of the regulatory framework. With this section, the Commission is seeking to gather feedback from stakeholders on whether a targeted review of MiFID II/MiFIR with an ambitious timeline would be appropriate to address the most urgent shortcomings that have been identified.
Section 2 contains specific questions on a number of well-defined issues that have been raised under the existing regulatory framework. The Commission will use the responses to assess the impact of possible changes to legislation on the basis of proposals put forward in previous public consultations and studies, as well as exchanges with experts. Within Section 2, the Commission has identified the following priority areas for review based on evidence gathered in the two years of implementation of MiFID II/MiFIR:
- The establishment of an EU consolidated tape – questions cover the current state of play; general features of the consolidated tape; the scope of the consolidated tape; and other MiFID II/MiFIR provisions with a link to the consolidated tape.
- Investor protection – questions cover easier access to simple and transparent products; relevance and accessibility of adequate information; client profiling and classification; product oversight, governance and inducements; distance communication; and reporting on best execution.
- Research unbundling rules and SME research coverage – questions cover proposals to increase the production of SME research; alternative ways of financing SME research; and promoting access to research on SMEs and increasing the quality of research.
- Commodity markets – questions cover position limits for illiquid and nascent commodity markets; and pre-trade transparency.
Section 2 also includes additional questions on the following areas identified as “non-priority” for the review:
- Derivatives trading obligation
- Multilateral systems
- Double volume cap
- Non-discriminatory access
- Digitalisation and new technologies
- Foreign exchange
Section 3 invites responders to bring to the Commission’s attention any additional regulatory aspects or identified issues that are not raised in the first two sections.
Eva M. Mykolenko
Associate Chief Counsel - Securities Regulation
endnotes
[1] Directive and Regulation on Markets in Financial Instruments (respectively MiFID II – Directive 2014/65/EU – and MiFIR – Regulation (EU) No 600/2014).
[2] The consultation is available at: https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/2020-mifid-2-mifir-review-consultation-document_en.pdf.