17 October 2014

ESMA published responses to Consultation Paper on Draft Technical Standards on the Market Abuse Regulation - Response I

Alternative Investment Management Association (AIMA)

AIMA has significant concerns in relation to disclosure and periodic trading restrictions for persons discharging managerial responsibility (PDMR) and the extension of requirements and restrictions to collective investment schemes such as UCITS funds and AIFs. AIMA considers that ESMA’s proposals ignore the nature of collective investment fund management and go far beyond the requirements contained within the Level 1 text.

AIMA disagrees entirely with the proposal to extend PDMR disclosure requirements to ongoing transactions by a third party collective investment manager, exercising full discretion regarding the particular investment strategy. The organization also strongly refutes the application of the closed period prohibition to such collective investment managers.

Full AIMA response

Investment Management Association (IMA)

The IMA notes that requiring firms to identify, aggregate and report all holdings in all indices and baskets, without any de minimis provision, would impose extra costs on the whole process, which would, inevitably, be passed on to the ultimate client. The chances of any such absolute rule identifying extra reportable positions are extremely low. The purpose behind the rule is to prevent managers making use of inside information, and to provide useful market information. Neither of these objectives would be advanced by an absolute regime with no de minimis threshold.

Full IMA response

British Bankers' Association (BBA)

The BBA considers that the proposed examples of practices and the indicators relating to market manipulation will generate additional uncertainty rather than providing much needed clarification. Given that some of the example practices may involve more than one indicator, there is overlap leading to repetition of the example practices in the current structure/format of the draft technical advice. 

This repetition detracts from highlighting the aims and intent which are important factors that should be taken into account where transactions or order to trade are being examined. some of the examples which appear to relate to potential manipulative behaviour through high frequency trading, are also lacking clarity as to exactly what is necessarily abusive about the practice or behaviour or at what point a practice goes from being proper to improper behaviour, e.g. 'quote stuffing', 'momentum ignition', 'ping orders'.

Full BBA response

Nasdaq

Nasdaq believes that Phishing in itself should not be regarded as an example of market abuse. Phishing, if successful, may be followed by market abuse but that does not make the phishing activity in itself and by nature to constitute market abuse. If phishing was included as an example of market abuse, then so should i.a. any practice that would aim at improperly gaining access to insider information. In that context, the market abuse occurs when the insider information is used, not when it is acquired.

Nasdaq also supports the reference to OTC transactions in the context of cross-product manipulation and inter-venue manipulation. OTC markets exist side by side with regulated venues in commodity markets. OTC financial instruments mimic financial instruments listed on a trading venue and market participants are as a rule active in both markets. There is a risk that the prices of financial instruments are used to manipulate transactions done bilaterally or OTC.

Full Nasdaq response

Deutsche Börse Group

The main concerns of Deutsche Börse Group (DBG) refer to the proposed specification of the indicators of market manipulation: DBG argues in particular to consider the peculiarities of benchmarks which is subject to a dedicated regulation; with regard to retail securitized derivatives DBG proposes to develop technical standards in a way which does not impair hedging activities of issuers and quoting activities of market makers which are essential for liquidity provision in these instruments.

Furthermore, phishing should not be included in the list of indicators of manipulative behaviour as it is not a trading-specific issue and proven security procedures do exist in order to prevent these kinds of activity. DBG strongly supports the approach to cover transactions taking place in the over the counter (OTC)- space within the new regime.

Full DBG response

Deutsche Bank

According to Deutsche Bank, transactions in collective investment funds (such as UCITS and AIFs) should not be required to be reported, since the PDMR may not have access to the relevant information.

The same rationale applies regarding financial instruments under an employees’ share scheme as the PDMR does not make an investment decision. The exceptional treatment that is suggested for closed periods would not therefore be necessary. At a minimum, the requirements could be made more proportionate by applying weighing criterion, similar to the proposed approach for index funds.

Full DB response

Consultation Paper - Draft technical advice on possible delegated acts concerning the MAR

All responses

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