A draft copy of the Markets in Financial Instruments
Regulation, the new European legislation covering the financial
markets due to be released next month, reveals that the
European Commission will significantly increase the regulation
of derivative trading in Europe.
Read the full text of the draft directive here.
Read the full text of the
draft regulation here.
The regulation, an update on Mifid will mandate open access
to clearing and expand current equities transparency regulation
to include all financial instruments.
The draft regulation centralises and enhances the ability of
the new European regulator, Esma, to take action to curb market
practices. Under the legislation, local regulators in
co-ordination with Esma have the power to set permanent bans on
financial products or activities and impose position
Previously held assumptions that minimal transparency,
oversight and investor protection in relation to [the trading
of instruments other than shares] is more conductive to market
efficiency no longer hold, the legislation said.
Included in the regulation are measures that will
significantly increase the amount of data that both exchanges
and brokers will have to hold on their clients positions.
The draft regulation raises a number of questions such as what
impact the mandated open access to clearing in conjunction with
the open access to the price data and reference to a benchmark
also mandated will have on the exchange ownership of derivative
Also currently in circulation around Brussels is a draft
directive to accompany the regulation. Contained within this
are proposals central to HFT and transparency.
The draft is still subject to amendments and will be subject
to more debate and then approval by all the member states
before coming into force.
For more, see Fointelligence.com and next months
Mifir: key points
· Transparency requirements set out in Mifid to apply
to all financial instruments
· Committed to minimise discretions available to
member states across the EU
· Only OTFs can refuse access to clients
· Pre-trade transparency waivers to Large in Scale
orders but ESMA to be informed
· Establishment of a consolidated tape for shares and
then derivatives in two years
· Data storage of all transactions to be kept for
five years and made available to regulators
· Some allowances for illiquid and non-standardised
contracts to be traded OTC
· All commercial barriers to clearing access to be
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