Recent regulatory intervention regarding trading facilities and trading in financial instruments - overview


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Financial instruments - Trading Facilities - MTFs – OTFs - Description on functioning - Trading - Market abuse
Over the course of the last months, some new legislative and regulatory interventions took place in respect of multilateral trading facilities (“MTF”) an organised trading facilities (“OTF”) and introspect of trading in financial instruments.

On the one hand the European Commission adopted technical standards with regard to the content and format of the description of the functioning of multilateral trading facilities and organised trading facilities in execution of article 18, (11) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2015 on markets in financial instruments and amending directive 2002/90/EC and Directive 2011/61/EU (O.J. . of 12 June 2014, ed. 173, 349; hereinafter “MiFID II”).

On the other hand, the increased scope of application of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (O.J. L of 12 June 2014, ed. 173, 1; hereinafter “Market Abuse Regulation”) resulted in the intervention from the Belgian legislator and the Belgian regulatory authority – the FSMA– in order to bring clarification.

In what follows, the above mentioned legislative and regulatory interventions will be discussed briefly.


1. Commission implementing regulation (EU) 2016/824 of 25 May 2016 laying down implementing technical standards with regard to the content and format of the description of the functioning of multilateral trading facilities and organised trading facilities and the notification to the European Securities and Markets Authority according to Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments

According to article 18, (10) of MiFID II, Member States must require that investment firms and market operators that operate a MTF or OTF provide the competent authority (NRAs and ESMA) with a detailed description of the functioning of the MTF or OTF. This detailed description should include, amongst others, any links to or participation by a regulated market, an MTF, an OTF or a systematic internaliser owned by the same investment firm or market operator, and a list of their members, participants and/or users.

Article 18, (11) of MiFID II assigns to the European Securities and Markets Authority (hereinafter “ESMA”) the task of developing draft implementing technical standards to determine the content and format of this detailed description and to submit them to the European Commission by 3 January 2016.

The power was conferred to the European Commission to adopt the implementing technical standards. ESMA submitted draft implementing technical standards to the European Commission on 28 September 2015 (see here for the document, p. 382 et seq.).

These draft implementing technical standard resulted in the Commission implementing regulation (EU) 2016/284.

Recognizing the need for competent authorities to receive complete information about the purpose, structure and organisation of MTFs and OTFs which they have to supervise, the implementing regulation indicates that the detailed description should focus upon the specific functionality of the trading system so as to enable competent authorities to assess whether the system satisfies the definition of an MTF or OTF and to assess its compliance with the particular, venue-orientated requirements of, inter alia, MiFID II.

The implementing regulation first of all lays down in article 2 which information investment firms and market operators that operate an MTF or OTF have to provide to their NRA, thereby distinguishing between the information that is to be provided on MTF’s and OTF’s (e.g. the asset classes of the financial instruments traded; the rules and procedures for making financial instruments available for trading and to ensure the objective and non-discriminatory access to the trading facilities, the measures and procedures to ensure that sufficient information is publicly available to users; the systems, procedures and arrangements to ensure compliance with MiFID II, descriptions of arrangements to facilitate liquidity; the arrangements and procedures to monitor transactions; the arrangements for the efficient settlement of the transactions; description of the functioning of the trading system, description of potential conflicts of interests, information regarding outsourcing arrangements).

Article 3 and 4 detail the additional information to be provided on MTFs. Article 6 provides the additional information to be provided on OTFs.

The information must be provided to the NRAs in the electronic format using the template in Table 1 of the Annex to the implementing regulation. An operator should also provide its NRA with a description of any material changes to the information previously submitted in accordance with this implementing regulation which would be relevant to an assessment of that operator's compliance with MiFID and Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and
amending Regulation (EU) No 648/2012 (O.J. L of 12 June 2014, ed. 173, 84).

The provisions of this implementing regulation will apply from 3 January 2017.


2. Royal Decree of 25 April 2016 amending, with a view to implementing regulation (EU) No 596/2014, the Royal Decree of 14 November 2007 on the obligations of the issuers of financial instruments that are allowed to trade on a regulated market and the Royal Decree of 21 August 2008 establishing further rules for certain multilateral trading facilities


The Market Abuse Regulation repealed the previous European legal framework on market abuse and actualized its provisions in a new instrument with direct effect, meaning they apply directly in each Member State.

The Royal Decree of 25 April 2016 therefore foresees in the partial implementation of the Market Abuse Regulation by repealing, with a view to promoting legal certainty, certain provisions of the Royal Decree of 14 November 2007 on the obligations of the issuers of financial instruments that are allowed to trade on a regulated market and the Royal Decree of 21 August 2008 establishing further rules for certain multilateral trading facilities.

For what concerns multilateral trading facilities, the Royal Decree of 25 April 2016 repeals the following articles of the Royal Decree of 21 August 2008:

- article 4, § 1, first sentence, 3°, that rendered certain provisions on the public disclosure of inside information of the Royal Decree of 14 November 2007 applicable to the issuers of financial instruments that are allowed to trade on Alternext;

- article 6, which rendered the obligation to compose a list of persons with access to inside information applicable to the issuers of financial instruments that are allowed to trade on Alternext of for which an application has been submitted;

- article 7, which rendered the obligation for persons discharging managerial responsibilities to notify the FSMA on transactions for their own account in shares emitted by the issuer to which they belong, or in derivatives or other coupled financial instruments applicable to the issuers of financial instruments that are allowed to trade on Alternext of for which an application has been submitted;

- article 8, which rendered the prohibition to disperse incorrect or misleading information applicable to Alternext, Trading Facility and Easynext by designated them as an “other market”.

Issuers of financial instruments that are allowed to trade on a multilateral trading facility will, as of 3 July 2016, have to comply with the abovementioned obligations in accordance with the relevant provisions of the new Market Abuse Regulation.


3. FSMA prepares the entry into force of the Market Abuse Regulation


In order to prepare (itself for) the entry into force of the Market Abuse Regulation on 3 July 2016, the FSMA composed a new circular and amended previous circulars to the provisions of the new Market Abuse Regulation.

Since, as mentioned above, the provisions of the Market Abuse Regulation concerning e.g. the public disclosure of inside information, the composition of list of persons with access to inside information and the notification of transactions by persons discharging managerial responsibilities will apply to multilateral trading facilities, the FSMA issued a circular 2016_07 of 18 May 2016 on the obligations of issuers that are registered on the “Free Market”. This circular indicates, while referring to the relevant provisions of the Market Abuse Regulation:

- what exactly constitutes inside information and when and how it should be publicly disclosed;

- that the list of persons with access to inside information should be composed as soon as inside information originates;

- that persons discharging managerial responsibilities have to notify each transaction on their own account in the financial instruments of the issuer.

The FSMA also issued an amended version of the circular containing the practical instructions on the Market Abuse Regulation. This circular clarifies how certain mandatory obligations to notify are to be abided. It stipulates, for example, that:

- issuers have to compose the list of persons with access to inside information using the standard form in Annex A;

- data on market survey that no longer constitute inside information are to communicated to potential investors using the standard form in Annex B;

- persons discharging managerial responsibilities have to notify their transactions using an online-application developed by the FSMA; and

- suspicious orders and transactions must be notified to the FSMA using the standard form in Annex D.

The FSMA also amended the circular on the obligations of issuers that are registered on Alternext and the circular on the acquisition of own shares or certificates by registered companies or companies of which the instruments are allowed to trade on certain multilateral trading facilities in order to adapt them to the provisions of the Market Abuse Regulation.


R. Feltkamp & G. Hendrikx