RegTech Intelligence 
JWG has extracted the following questions from ESMA‘s Consultation Paper on MiFID/MiFIR Technical Advice. ESMA needs to deliver this advice to the European Commission by December 2014 and is therefore subject to a condensed consultation process for this paper.
For more on MiFID/MiFIR see here.
Q1. Do you agree with the proposed cumulative conditions to be fulfilled in order for an investment service to be deemed to be provided in an incidental manner?
Q2. Do you agree that it is appropriate to clarify that the use of distribution channels does not exclude the possibility that investment advice is provided to investors?
Q3. Do you agree that the existing compliance requirements included in Article 6 of the MiFID Implementing Directive should be expanded?
Q4. Are there any other areas of the Level 2 requirements concerning the compliance function that you consider should be updated, improved or revised?
Q5. Do you already have in place arrangements that comply with the requirements set out in the draft technical advice set out above?
Q6. Do you consider that additional records should be mentioned in the minimum list proposed in the table in the draft technical advice above? Please list any additional records that could be added to the minimum list for the purposes of MiFID II, MiFIR, MAD or MAR.
Q7. What, if any, additional costs and/or benefits do you envisage arising from the proposed approach? Please quantify and provide details.
Q8. What additional measure(s) could firms implement to reduce the risk of non-compliance with the rules in relation to telephone recording and electronic communications?
Q9. Do you agree that firms should periodically monitor records to ensure compliance with the recording requirement and wider regulatory requirements?
Q10. Should any additional items of information be included as a minimum in meeting minutes or notes where relevant face-to-face conversations take place with clients?
Q11. Should clients be required to sign these minutes or notes?
Q12. Do you agree with the proposals for storage and retention set out in the above draft technical advice?
Q13. More generally, what additional costs, impacts and/or benefits do you envisage as a result of the requirements set out in the entire draft technical advice above?
Q14. Should the proposed distributor requirements apply in the case of distribution of products (e.g. shares and bonds as well as over-the-counter (OTC) products) available on the primary market or should they also apply to distribution of products on the secondary market (e.g. freely tradable shares and bonds)? Please state the reason for your answer.
Q15. When products are manufactured by non-MiFID firms or third country firms and public information is not available, should there be a requirement for a written agreement under which the manufacturer must provide all relevant product information to the distributor?
Q16. Do you think it would be useful to require distributors to periodically inform the manufacturer about their experience with the product? If yes, in what circumstances and what specific information could be provided by the distributor?
Q17. What appropriate action do you think manufacturers can take if they become aware that products are not sold as envisaged (e.g. if the product is being widely sold to clients outside of the product’s target market)?
Q18. What appropriate action do you think distributors can take, if they become aware of any event that could materially affect the potential risk to the identified target market (e.g. if the distributor has mis-judged the target market for a specific product)?
Q19. Do you consider that there is sufficient clarity regarding the requirements of investment firms when acting as manufacturers, distributors or both? If not, please provide details of how such requirements should interact with each other.
Q20. Are there any other product governance requirements not mentioned in this paper that you consider important and should be considered? If yes, please set out these additional requirements.
Q21. For investment firms responding to this consultation, what costs would you incur in order to meet these requirements, either as distributors or manufacturers?
Q22. Do you agree with the proposal for investment firms to establish and maintain a client assets oversight function?
Q23. What would be the cost implications of establishing and maintaining a function with specific responsibility for matters relating to the firm’s compliance with its obligations regarding the safeguarding of client instruments and funds?
Q24. Do you think that the examples in this chapter constitute an inappropriate use of TTCA? If not, why not? Are there any other examples of inappropriate use of or features of inappropriate use of TTCA?
Q25. Do you agree with the proposal to clarify that the use of TTCA is not a freely available option for avoiding the protections required under MiFID? Do you agree with the proposal to place high-level requirements on firms to consider the appropriateness of TTCA? Should risk disclosures be required in this area? Please explain your answer. If not, why not?
Q26. Do you agree with the proposal to require a reasonable link between the client’s obligation and the financial instruments or funds subject to TTCA?
Q27. Do you already make any assessment of the suitability of TTCAs? If not, would you need to change any processes to meet such a requirement, and if so, what would be the cost implications of doing so?
Q28. Are any further measures needed to ensure that the transactions envisaged under Article 19 of the MiFID Implementing Directive remain possible in light of the ban on concluding TTCAs with retail clients in Article 16(10) of MiFID II?
Q29. Do you agree with the proposal to require firms to adopt specific arrangements to take appropriate collateral, monitor and maintain its appropriateness in respect of securities financing transactions?
Q30. Is it suitable to place collateral, monitoring and maintaining measures on firms in respect of retail clients only, or should these be extended to all classes of client?
Q31. Do you already take collateral against securities financing transactions and monitor its appropriateness on an on-going basis? If not, what would be the cost of developing and maintaining such arrangements?
Q32. Do you agree that investment firms should evidence the express prior consent of non-retail clients to the use of their financial instruments as they are currently required to do so for retail clients clearly, in writing or in a legally equivalent alternative means, and affirmatively executed by the client? Are there any cost implications?
Q33. Do you anticipate any additional costs in order to comply with the requirements proposed in relation to securities financing transactions and collateralisation? If yes, please provide details.
Q34. Do you think that it is proportionate to require investment firms to consider diversification of client funds as part of the due diligence requirements when depositing client funds? If not, why? What other measures could achieve a similar objective?
Q35. Are there any cost implications to investment firms when considering diversification as part of due diligence requirements?
Q36. Where an investment firm deposits client funds at a third party that is within its own group, should an intra-group deposit limit be imposed? If yes, would imposing an intra-group deposit limit of 20% in respect of client funds be proportionate? If not, what other percentage could be proportionate? What other measures could achieve similar objectives? What is the rationale for this percentage?
Q37. Are there any situations that would justify exempting an investment firm from such a rule restricting intra-group deposits in respect of client funds, for example, when other safeguards are in place?
Q38. Do you place any client funds in a credit institution within your group? If so, what proportion of the total?
Q39. What would be the cost implications for investment firms of diversifying holdings away from a group credit institution?
Q40. What would be the impact of restricting investment firms in respect of the proportion of funds they could deposit at affiliated credit institutions? Could there be any unintended consequences?
Q41. What would be the cost implications to credit institutions if investment firms were limited in respect of depositing client funds at credit institutions in the same group?
Q42. Do you agree with the proposal to prevent firms from agreeing to liens that allow a third party to recover costs from client assets that do not relate to those clients, except where this is required in a particular jurisdiction?
Q43. Do you agree with the proposal to specify specific risk warnings where firms are obliged to agree to wide-ranging liens exposing their clients to the risk?
Q44. What would be the one off costs of reviewing third party agreements in the light of an explicit prohibition of such liens, and the on-going costs in respect of risk warnings to clients?
Q45. Should firms be obliged to record the presence of security interests or other encumbrances over client assets in their own books and records? Are there any reasons why firms might not be able to meet such a requirement? Are there any cost implications of recording these?
Q46. Should the option of ‘other equivalent measures’ for segregation of client financial instruments only be available in third country jurisdictions where market practice or legal requirements make this necessary?
Q47. Should firms be required to develop additional systems to mitigate the risks of ‘other equivalent measures’ and require specific risk disclosures to clients where a firm must rely on such ‘other equivalent measures’, where not already covered by the Article 32(4) of the MiFID Implementing Directive?
Q48. What would be the on-going costs of making disclosures to clients when relying on ‘other equivalent measures’?
Q49. Should investment firms be required to maintain systems and controls to prevent shortfalls in client accounts and to prevent the use of one client’s financial instruments to settle the transactions of another client, including: (i) advancing monitoring systems to ensure the ability to deliver on the settlement date and putting in place remedial measures to be taken if this cannot be done; (ii) agreeing arrangements with clients regarding how to manage client shortfalls that may arise; and (iii) proactively resolving unsettled transaction, including requesting undelivered securities, outstanding beyond the settlement date?
Q50. Do you already have measures in place that address the proposals in this chapter? What would be the one-off and on-going cost implications of developing systems and controls to address these proposals?
Q51. Do you agree that requiring firms to hold necessary information in an easily accessible way would reduce uncertainty regarding ownership and delays in returning client financial instruments and funds in the event of an insolvency?
Q52. Do you think the information detailed in the draft technical advice section of this chapter is suitable for including in such a requirement?
Q53. Do you already maintain the information listed in a way that would be easily accessible on request by a competent person, either before or after insolvency? What would be the cost of maintaining such information in a way that is easily accessible to an insolvency practitioner in the event of firm failure?
Q54. Should investment firms be required to assess and periodically review – at least annually – the conflicts of interest policy established, taking all appropriate measures to address any deficiencies? Please also state the reason for your answer.
Q55. Do you consider that additional situations to those identified in Article 21 of the MiFID Implementing Directive should be mentioned in the measures implementing MiFID II? Please explain your rationale for any additional suggestions.
Q56. Do you consider that the distinction between investment research and marketing communications drawn in Article 24 of the MiFID Implementing Directive is sufficient and sufficiently clear? If not, please suggest any improvements to the existing framework and the rationale for your proposals.
Q57. Do you consider that the additional organisational requirements listed in Article 25 of the MiFID Implementing Directive and addressed to firms producing and disseminating investment research are sufficient to properly regulate the specificities of these activities and to protect the objectivity and independence of financial analysts and of the investment research they produce? If not, please suggest any improvements to the existing framework and the rationale for your proposals.
Q58. Are there additional details or requirements you believe should be included?
Q59. Do you consider that investment firms should be required to discuss with the issuer client any hedging strategies they plan to undertake with respect to the offering, including how these strategies may impact the issuer client’s interest? If not, please provide your views on possible alternative arrangements. In addition to stabilisation, what other trading strategies might the firm take in connection with the offering that would impact the issuer?
Q60. Have you already put in place organisational arrangements that comply with these requirements?
Q61. How would you need to change your processes to meet the requirements?
Q62. What costs would you incur in order to meet these requirements?
Q63. Do you agree with the definition of the scope of the requirements as proposed? If not, why not?
Q64. Do you agree with the proposal with respect to variable remuneration and similar incentives? If not, why not?
Q65. Do you agree that the information to retail clients should be up-to-date, consistently presented in the same language, and in the same font size in order to be fair, clear and not misleading?
Q66. Do you agree that the information about future performance should be provided under different performance scenarios in order to illustrate the potential functioning of financial instruments?
Q67. Do you agree that the information to professional clients should comply with the proposed conditions in order to be fair, clear and not misleading? Do you consider that the information to professional clients should meet any of the other conditions proposed for retail clients?
Q68. Do you agree with the proposal to further specify information provided to clients about financial instruments and their risks?
Q70. Do you consider that, in addition to the information requirements suggested in this CP (including information on investment advice, financial instruments, costs and charges and safeguarding of client assets), further improvements to the information requirements in other areas should be proposed? If yes, please specify, by making reference to existing requirements in the MiFID Implementing directive.
Q71. Do you agree with the proposal to fully apply requirements on information to clients on costs and charges to professional clients and eligible counterparties and to allow these clients to opt-out from the application of these requirements in certain circumstances?
Q72. Do you agree with the scope of the point of sale information requirements?
Q73. Do you agree that post-sale information should be provided where the investment firm has established a continuing relationship with the client?
Q74. Do you agree with the proposed costs and charges to be disclosed to clients, as listed in the Annex to this chapter? If not please state your reasons, including describing any other cost or charges that should be included.
Q75. Do you agree that the point of sale information on costs and charges could be provided on a generic basis? If not, please explain your response.
Q76. Do you have any other comments on the methodology for calculating the point of sale figures?
Q77. Do you have any comments on the requirements around illustrating the cumulative effect of costs and charges?
Q78. What costs would you incur in order to meet these requirements?
Q79. Do you agree with the proposed exhaustive list of minor non-monetary benefits that are acceptable? Should any other benefits be included on the list? If so, please explain.
Q80. Do you agree with the proposed approach for the disclosure of monetary and non-monetary benefits, in relation to investment services other than portfolio management and advice on an independent basis?
Q81. Do you agree with the non-exhaustive list of circumstances and situations that NCAs should consider in determining when the quality enhancement test is not met? If not, please explain and provide examples of circumstances and situations where you believe the enhancement test is met. Should any other circumstances and/or situations be included in the list? If so, please explain.
Q82. Do you anticipate any additional costs in order to comply with the requirements proposed in this chapter? If yes, please provide details.
Q83. Do you agree with the approach proposed in the technical advice above in order to ensure investment firm’s compliance with the obligation to assess a sufficient range of financial instruments available on the market? If not, please explain your reasons and provide for alternative or additional criteria.
Q84. What type of organisational requirements should firms have in place (e.g. degree of separation, procedures, controls) when they provide both independent and non-independent advice?
Q85. Do you anticipate any additional costs in order to comply with the requirements proposed in this chapter? If yes, please provide details.
Q86. Do you agree that the existing suitability requirements included in Article 35 of the MiFID Implementing Directive should be expanded to cover points discussed in the draft technical advice of this chapter?
Q87. Are there any other areas where MiFID Implementing Directive requirements covering the suitability assessment should be updated, improved or revised based on your experiences under MiFID since it was originally implemented?
Q88. What is your view on the proposals for the content of suitability reports? Are there additional details or requirements you believe should be included, especially to ensure suitability reports are sufficiently ‘personalised’ to have added value for the client, drawing on any initiatives in national markets?
Q89. Do you agree that periodic suitability reports would only need to cover any changes in the instruments and/or circumstances of the client rather than repeating information which is unchanged from the first suitability report?
Q90. Do you agree the existing criteria included in Article 38 of the Implementing Directive should be expanded to incorporate the above points, and that an instrument not included explicitly in Article 25(4)(a) of MiFID II would need to meet to be considered non-complex?
Q91. Are there any other areas where the MiFID Implementing Directive requirements covering the appropriateness assessment and conditions for an instrument to be considered non-complex should be updated, improved or revised based on your experiences under MiFID I?
Q92. Do you agree that investment firms should be required to enter into a written (or equivalent) agreement with their professional clients, at least for certain services? If yes, in which circumstances? If no, please state your reason.
Q93. Do you agree that investment firms should be required to enter into a written (or equivalent) agreement for the provision of investment advice to any client, at least where the investment firm and the client have a continuing business relationship? If not, why not?
Q94. Do you agree that investment firms should be required to enter into a written (or equivalent) agreement for the provision of custody services (safekeeping of financial instruments) to any client? If not, why not?
Q95. Do you agree that investment firms should be required to describe in the client agreement any advice services, portfolio management services and custody services to be provided? If not, why not?
Q96. Do you agree that the content of reports for professional clients, both for portfolio management and execution of orders, should be aligned to the content applicable for retail clients?
Q97. Should investment firms providing portfolio management or operating a retail client account that includes leveraged financial instruments or other contingent liability transactions be required to agree on a threshold with retail clients that should at least be equal to 10% (and relevant multiples) of the initial investments (or the value of the investment at the beginning of each year)?
Q98. Do you agree that Article 43 of the MiFID Implementing Directive should be updated to specify that the content of statements is to include the market or estimated value of the financial instruments included in the statement with a clear indication of the fact that the absence of a market price is likely to be indicative of a lack of liquidity?
Q99. Do you consider that it would be beneficial to clients to not only provide details of those financial instruments that are subject to TTCA at the point in time of the statement, but also details of those financial instruments that have been subject to TTCA during the reporting period?
Q100. What other changes to the MiFID Implementing Directive in relation to reporting to clients should ESMA consider advising the Commission on?
Q101. Do you have any additional suggestions to provide clarity of the best execution obligations in MiFID II captured in this section or to further ESMA’s objective of facilitating clear disclosures to clients?
Q102. Do your policies and your review procedures already the details proposed in this chapter? If they do not, what would be the implementation and recurring cost of modifying them and distributing the revised policies to your existing clients? Where possible please provide examples of the costs involved.
Q104. Do you agree with the proposal not to allow undertakings classified as professional clients on request to be recognised as eligible counterparties?
Q105. For investment firms responding to this consultation, how many clients have you already classified as eligible counterparties using the following approaches under Article 50 of the MiFID Implementing Directive: (i) other undertakings that are to be considered as professional clients pursuant to Section I of Annex II to MiFID I (Article 50(1) subparagraph 1); and (ii) clients who have requested to be treated as professional clients (professional clients on request in accordance with Annex II, section 2 of MiFID) (Article 50(1) subparagraph 2)?
Q106. For investment firms responding to this consultation, what costs would you incur in order to meet these requirements?
Q107. Do you agree with the criteria proposed?
Q108. Are there any additional criteria that you would suggest adding?
Q109. Do you agree with the liquidity thresholds ESMA proposes for equities? Would you calibrate the thresholds differently? Please provide reasons for your answers.
Q110. Do you agree that the free float for depositary receipts should be determined by the number of shares issued in the issuer’s home market? Please provide reasons for your answer.
Q111. Do you agree with the proposal to set the liquidity threshold for depositary receipts at the same level as for shares? Please provide reasons for your answer.
Q112. Do you agree with the liquidity thresholds ESMA proposes for depositary receipts? Would you calibrate the thresholds differently? Please provide reasons for your answers.
Q113. Do you agree that the criterion of free float could be addressed through the number of units issued for trading? If yes, what de minimis number of units would you suggest? Is there any other more appropriate measure in your view? Please provide reasons for your answer.
Q114. Based on your experience, do you agree with the preliminary results related to the trading patterns of ETFs? Please provide reasons for your answer.
Q115. Do you agree with the liquidity thresholds ESMA proposes for ETFs? Would you calibrate the thresholds differently? Please provide reasons for your answers, including describing your own role in the market (e.g. market-maker, issuer etc).
Q116. Can you identify any additional instruments that could be caught by the definition of certificates under Article 2(1)(27) of MiFIR?
Q117. Based on your experience, do you agree with the preliminary results related to the trading patterns of certificates? Please provide reasons for your answer.
Q118. Do you agree with the liquidity thresholds ESMA proposes for certificates? Would you calibrate the thresholds differently? Please provide reasons for your answer.
Q119. Do you agree that the criterion of free float could be addressed through the issuance size? If yes, what de minimis issuance size would you suggest? Is there any other more appropriate measure in your view? Please provide reasons for your answer.
Q120. Do you think the discretion permitted to Member States under Article 22(2) of the Commission Regulation to specify additional instruments up to a limit as being liquid should be retained under MiFID II?
Q121. Do you agree with ESMA’s assessment concerning financial instruments outside the scope of the MiFIR non-equity transparency obligations?
Q122. For the systematic and frequent criterion, ESMA proposes setting the percentage for the calculation between 0.25% and 0.5%. Within this range, what do you consider to be the appropriate level? Please provide reasons for your answer. If you consider that the threshold should be set at a level outside this range, please specify at what level this should be with justifications.
Q123. Do you support calibrating the threshold for the systematic and frequent criterion on the liquidity of the financial instrument as measured by the number of daily transactions?
Q124. For the substantial criterion, ESMA proposes setting the percentage for the calculation between 15% and 25% of the total turnover in that financial instrument executed by the investment firm on own account or on behalf of clients and between 0.25% and 0.5% of the total turnover in that financial instrument in the Union. Within these ranges, what do you consider to be the appropriate level? Please provide reasons for your answer. If you consider that the thresholds should be set at levels outside these ranges, please specify at what levels these should be with justifications.
Q125. Do you support thresholds based on the turnover (quantity multiplied by price) as opposed to the volume (quantity) of shares traded? Do you agree with the definition of total trading by the investment firm? If not please provide alternatives and reasons for your answer.
Q126. ESMA has calibrated the initial thresholds proposed based on systematic internaliser activity in shares. Do you consider those thresholds adequate for: (i) ETF; (ii) depositary receipts; and/or (iii) certificates?
Q127. Do you consider a quarterly assessment of systematic internaliser activity as adequate? If not, which assessment period would you propose? Do you consider that one month provides sufficient time for investment firms to establish all the necessary arrangements in order to comply with the systematic internaliser regime?
Q128. For the systematic and frequent criterion, do you agree that the thresholds should be set per asset class? Please provide reasons for your answer. If you consider the thresholds should be set at a more granular level (sub-categories) please provide further detail and justification.
Q129. With regard to the ‘substantial basis’ criterion, do you support thresholds based on the turnover (quantity multiplied by price) as opposed to the volume (quantity) of instruments traded. Do you agree with the definition of total trading by the investment firm? If not please provide alternatives and reasons for your answer.
Q130. Do you agree with ESMA’s proposal to apply the systematic internaliser thresholds for bonds and structured finance products at an ISIN code level? If not please provide alternatives and reasons for your answer.
Q131. For derivatives, do you agree that some aggregation should be established in order to properly apply the systematic internaliser definition? If yes, do you consider that the tables presented in Annex 3.6.1 of the DP could be used as a basis for applying the systematic internaliser thresholds to derivatives products? Please provide reasons, and when necessary alternatives, to your answer.
Q132. Do you agree with ESMA’s proposal to set a threshold for liquid derivatives? Do you consider any scenarios could arise where systematic internalisers would be required to meet pre-trade transparency requirements for liquid derivatives where the trading obligation does not apply?
Q133. Do you consider a quarterly assessment by investment firms in respect of their systematic internaliser activity is adequate? If not, what assessment period would you propose?
Q134. Within the ranges proposed by ESMA, what do you consider to be the appropriate level? Please provide reasons for your answer. If you consider that the threshold should be set at a level outside this range, please specify at what level this should be with justifications and where possible data to support them.
Q135. Do you consider that thresholds should be set as absolute numbers rather than percentages for some specific categories? Please provide reasons for your answer.
Q136. What thresholds would you consider as adequate for the emission allowance market?
Q137. Do you agree with the definition of portfolio trade and of orders subject to conditions other than the current market price? Please give reasons for your answer?
Q138. Do you agree with the list of exceptional circumstances? Please give reasons for your answer. Do you agree with ESMA’s view on the conditions for updating the quotes? Please give reasons for your answer.
Q139. Do you agree that each systematic internaliser should determine when the number and/or volume of orders sought by clients considerably exceed the norm? Please give reasons for your answer?
Q140. Do you agree that any price within the bid and offer spread quoted by the systematic internaliser would fall within a public range close to market conditions? Please give reasons for your answer.
Q141. Do you agree that the risks a systematic internaliser faces is similar to that of a liquidity provider? If not, how do they differ?
Q142. Do you agree that the sizes established for liquidity providers and systematic internalisers should be identical? If not, how should they differ?
Q143. Do you agree with the proposed definition of “regular and continuous” publication of quotes? If not, what would definition you suggest?
Q144. Do you agree with the proposed definition of “normal trading hours”? Should the publication time be extended?
Q145. Do you agree with the proposal regarding the means of publication of quotes?
Q146. Do you agree that a systematic internaliser should identify itself when publishing its quotes through a trading venue or a data reporting service?
Q147. Is there any other mean of communication that should be considered by ESMA?
Q148. Do you agree with the importance of ensuring that quotes published by investment firms are consistent across all the publication arrangements?
Q149. Do you agree with the compulsory use of data standards, formats and technical arrangements in development of Article 66(5) of MiFID II?
Q150. Do you agree with the imposing the publication on a ‘machine-readable’ and ‘human readable’ to investment firms publishing their quotes only through their own website?
Q151. Do you agree with the requirements to consider that the publication is ‘easily accessible’?
Q152. Do you think that publication of unexecuted orders through a data reporting service or through an investment firm’s website would effectively facilitate execution?
Q153. Do you agree with this proposal? If not, what would you suggest?
Q154. Would these disclosure requirements be a meaningful instrument to ensure that prices are on a reasonable commercial basis?
Q155. Are there any other possible requirements in the context of transparency/disclosure to ensure a reasonable price level?
Q156. To what extent do you think that comprehensive transparency requirements would be enough in terms of desired regulatory intervention?
Q157. What are you views on controlling charges by fixing a limit on the share of revenue that market data services can represent?
Q158. Which percentage range for a revenue limit would you consider reasonable?
Q159. If the definition of “reasonable commercial basis” is to be based on costs, do you agree that LRIC+ is the most appropriate measure? If not what measure do you think should be used?
Q160. Do you agree that suppliers should be required to maintain a cost model as the basis of setting prices against LRIC+? If not how do you think the definition should be implemented?
Q161. Do you believe that if there are excessive prices in any of the other markets, the same definition of “reasonable commercial basis” would be appropriate, or that they should be treated differently? If the latter, what definition should be used?
Q162. Within the options A, B and C, do you favour one of them, a combination of A+B or A+C or A+B+C? Please explain your reasons.
Q163. What are your views on the costs of the different approaches? Q164. Is there some other approach you believe would be better? Why?
Q165. Do you think that the offering of a ‘per-user’ pricing model designed to prevent multiple charging for the same information should be mandatory?
Q166. If yes, in which circumstances?
Q167. Which would be your preferred option? Why?
Q168. Can you identify any other advantages or disadvantages of the options put forward?
Q169. How would you reduce the impact of the disadvantages identified in your preferred option?
Q170. If you prefer Option 2, please advise ESMA whether for the calculation of the median daily lifetime of the orders of the member/participant, you would take into account only the orders sent for liquid instruments or all the activity in the trading venue.
Q171. Do you agree with the above assessment? If not, please elaborate.
Q172. Do you consider it necessary to clarify the definitions of DEA, DMA and SA provided in MiFID? In what area would further clarification be required and how would you clarify that?
Q173. Is there any other activity that should be covered by the term “DEA”, other than DMA and SA? In particular, should AOR be considered within the DEA definition?
Q174. Do you consider that electronic order transmission systems through shared connectivity arrangements should be included within the scope of DEA?
Q175. Are you aware of any order transmission systems through shared arrangements which would provide an equivalent type of access as the one provided by DEA arrangements?
Q176. Do you support assessing the percentage of issuers on the basis of number of issuers only? If not, what approach would you suggest?
Q177. Which of the three different options described in the draft technical advice box above for assessing whether an SME-GM meets the criterion of having at least fifty per cent of SME issuers would you prefer?
Q178. Do you agree with the approach described above (in the box above), that only falling below the qualifying 50% threshold for a number of three consecutive years could lead to deregistration as a SME-GM or should the period be limited to two years?
Q179. Should an SME-GM which falls below the 50% threshold in one calendar year be required to disclose that fact to the market?
Q180. Which of the alternatives described above on how to deal with non-equity issuers for the purposes of the “at least 50% criterion” do you consider the most appropriate? Please give reasons for your answer.
Q181. Do you agree that an SME-GM should be able to operate under the models described above, and that the choice of model should be left to the discretion of the operator (under the supervision of its NCA)?
Q182. Do you agree that an SME-GM should establish and operate a regime which its NCA has assessed to be effective in ensuring that its issuers are “appropriate”?
Q183. Do you agree with the factors to which a NCA should have regard when assessing if an SME-GM’s regulatory regime is effective?
Q184. Do you think that there should be an appropriateness test for an SME-GM issuer’s management and board in order to confirm that they fulfil the responsibilities of a publicly quoted company?
Q185. Do you think that there should be an appropriateness test for an SME-GM issuer’s systems and controls in order to confirm that they provide a reasonable basis for it to comply with its continuing obligations under the rules of the market?
Q186. Do you agree with i, ii or iii below? (i) An SME-GM issuer should be required to disclose whether or not it has sufficient working capital and if not how it proposes to make up this shortfall. (ii) An SME-GM issuer should be required to have sufficient working capital to meet its needs for a minimum period. (iii) The future Level 2 Regulation should remain silent on the adequacy of an issuer’s working capital.
Q187. Are there any other criteria that should be set for the initial and on-going admission of financial instruments of issuers to SME-GMs?
Q188. Should the SME-GM regime apply a general principle that an admission document should contain sufficient information for an investor to make an informed assessment of the financial position and prospects of the issuer and the rights attaching to its securities?
Q189. Do you agree that SME-GMs should be able to take either a ‘top down’ or a ‘bottom up’ approach to their admission documents where a Prospectus is not required?
Q190. Do you think that MiFID II should specify the detailed disclosures, or categories of disclosure, that the rules of a SME-GM would need to require, in order for admission documents prepared in accordance with those rules to comply with Article 33(3)(c) of MiFID II? Or do you think this should be the responsibility of the individual market, under the supervision of its NCA?
Q191. If you consider that detailed disclosure requirements should be set at a MiFID level, which specific disclosures would be essential to the proper information of investors? Which elements (if any) of the proportionate schedules set out in Regulation 486/2012 should be dis-applied or modified, in order for an admission document to meet the objectives of the SME-GM framework (as long as there is no public offer requiring that a Prospectus will be drafted under the rules of the Prospectus Directive)?
Q192. Should the future Level 2 Regulation require an SME-GM to make arrangements for an appropriate review of an admission document, designed to ensure that the information it contains is complete?
Q193. Do you agree with this initial assessment by ESMA?
Q194. In your view which reports should be included in the on-going periodic financial reporting by an issuer whose financial instruments are admitted to trading on an SME-GM?
Q195. How and by which means should SME-GMs ensure that the reporting obligations are fulfilled by the issuers?
Q196. Do you think that the more generous deadlines proposed for making reports public above (in the Box above, paragraph 23) are suitable, or should the deadlines imposed under the rules of the Transparency Directive also apply to issuers on SME-GMs?
Q197. Do you agree with this assessment that the MiFID II framework should not impose any additional requirements/additional relief to those envisaged by MAR?
Q198. What is your view on the possible requirements for the dissemination and storage of information?
Q199. How and by which means should trading venues ensure that the dissemination and storage requirements are fulfilled by the issuers and which of the options described above do you prefer?
Q200. How long should the information be stored from your point of view? Do you agree with the proposed period of 5 years or would you prefer a different one (e.g., 3 years)?
Q201. Do you agree with this assessment that the MiFID II framework should not impose any additional requirements to those presented in MAR?
Q202. Do you agree that an approach based on a non-exhaustive list of examples provides an appropriate balance between facilitating a consistent application of the exception, while allowing appropriate judgements to be made on a case by case basis?
Q203. Do you agree that NCAs would also need to consider the criteria described in paragraph 6 iii and iv, when making an assessment of relevant costs or risks?
Q204. Which specific circumstances would you include in the list? Do you agree with the proposed examples?
Q205. Do you consider that the criteria established by Article 16 of MiFID Implementing Regulation remain appropriate for regulated markets?
Q206. Do you agree with the additional criteria for establishing the substantial importance in the cases of MTFs and OTFs?
Q207. Which circumstances would you include in this list? Do you agree with the circumstances described in the draft technical advice? What other circumstances do you think should be included in the list?
Q208. Do you support the approach suggested by ESMA?
Q209. Is there any limitation to the ability of the operator of several trading venues to identify a potentially abusive conduct affecting related financial instruments?
Q210. What can be the implications for trading venues to make use of all information publicly available to complement their internal analysis of the potential abusive conduct to report such as managers’ dealings or major shareholders’ notifications)? Are there other public sources of information that could be useful for this purpose?
Q211. Do you agree that the signals listed in the Annex contained in the draft advice constitute appropriate indicators to be considered by operators of trading venues? Do you see other signals that could be relevant to include in the list?
Q212. Do you consider that front running should be considered in relation to the duty for operators of trading venues to report possible abusive conduct? If so, what could be the possible signal(s) to include in the list?
Q213. Do you agree with ESMA’s approach on specifying contracts that “must” be physically settled and contracts that “can” be physically settled?
Q214. Which oil products in your view should be caught by the definition of C6 energy derivatives contracts and therefore be within the scope of the exemption? Please give reasons for your view stating, in particular, any practical repercussions of including or excluding products from the scope.
Q215. Do you agree with ESMA’s approach on specifying contracts that must be physically settled?
Q216. How do operational netting arrangements in power and gas markets work in practice? Please describe such arrangements in detail. In particular, please describe the type and timing of the actions taken by the various parties in the process, and the discretion over those actions that the parties have.
Q217. Please provide concrete examples of contracts that must be physically settled for power, natural gas, coal and oil. Please describe the contracts in detail and identify on which platforms they are traded at the moment.
Q218. How do you understand and how would you describe the concepts of “force majeure” and “other bona fide inability to settle” in this context?
Q219. Do you agree that Article 38 of Regulation (EC) No 1287/2006 has worked well in practice and elements of it should be preserved? If not, which elements in your view require amendments?
Q220. Do you agree that the definition of spot contract in paragraph 2 of Article 38 of Regulation (EC) 1287/2006 is still valid and should become part of the future implementing measures for MiFID II? If not, what changes would you propose?
Q221. Do you agree that the definition of a contract for commercial purposes in paragraph 4 of Article 38 of Regulation (EC) 1287/2006 is still valid and should become part of the future implementing measures for MiFID II? If not, what changes would you propose? What other contracts, in your view, should be listed among those to be considered for commercial purposes?
Q222. Do you agree that the future Delegated Act should not refer to clearing as a condition for determining whether an instrument qualifies as a commodity derivative under Section C 7 of Annex I?
Q223. Do you agree that standardisation of a contract as expressed in Article 38(1) Letter c of Regulation (EC) No 1287/2006 remains an important indicator for classifying financial instruments and therefore should be maintained?
Q224. Do you agree with the proposal to maintain the alternatives for trading contracts in Article 38(1)(a) of Regulation (EC) No 1287/2006 taking into account the emergence of the OTF as a MiFID trading venue in the future Delegated Act?
Q225. Do you agree that the existing provision in Article 38(3) of Regulation (EC) No 1287/2006 for determining whether derivative contracts within the scope of Section C(10) of Annex I should be classified as financial instruments should be updated as necessary but overall be maintained? If not, which elements in your view require amendments?
Q226. Do you agree that the list of contracts in Article 39 of Regulation (EC) No 1287/2006 should be maintained? If not, which type of contracts should be added or which ones should be deleted?
Q227. What is your view with regard to adding as an additional type of derivative contract those relating to actuarial statistics?
Q228. What do you understand by the terms “reason of default or other termination event” and how does this differ from “except in the case of force majeure, default or other bona fide inability to perform”?
Q229. Do you agree with the proposed threshold for the number of position holders? If not, please state your preferred thresholds and the reason why.
Q230. Do you agree with the proposed minimum threshold level for the open interest criteria for the publication of reports? If not, please state your preferred alternative for the definition of this threshold and explain the reasons why this would be more appropriate.
Q231. Do you agree with the proposed timeframes for publication once activity on a trading venue either reaches or no longer reaches the two thresholds?
Q232. Do you agree that the listed factors and criteria allow ESMA to determine the existence of a threat to the stability of the (whole or part of the) financial system in the EU?
Q233. What other factors and criteria should be taken into account?
Q234. Do you agree with ESMA’s definition of a market fulfilling its economic function?
Q235. Do you agree that the listed factors and criteria allow ESMA to adequately determine the existence of a threat to the orderly functioning and integrity of financial markets or commodity derivative market so as to justify position management intervention by ESMA?
Q236. What other factors and criteria should be taken into account?
Q237. Do you consider that the above factors sufficiently take account of “the degree to which positions are used to hedge positions in physical commodities or commodity contracts and the degree to which prices in underlying markets are set by reference to the prices of commodity derivatives”? If not, what further factors would you propose?
Q238. Do you agree that the listed factors and criteria allow ESMA to determine the appropriate reduction of a position or exposure entered into via a derivative?
Q239. What other factors and criteria should be taken into account?
Q240. Do you agree that some factors are more important than others in determining what an “appropriate reduction of a position” is within a given market? If yes, which are the most important factors for ESMA to consider?
Q241. Do you agree that the listed factors and criteria allow ESMA to adequately determine the situations where a risk of regulatory arbitrage could arise from the exercise of position management powers by ESMA?
Q242. What other criteria and factors should be taken into account?
Q243. If regulatory arbitrage may arise from inconsistent approaches to interrelated markets, what is the best way of identifying such links and correlations?
Q244. What are your views on the proposed approach for legal documentation and portfolio compression criteria?
Q245. What are your views on the approach proposed by ESMA with regard to information to be published by the compression service provider related to the volume of transactions and the timing when they were concluded?