In the field of trading, there is no full harmonisation of the rules governing trading venues: the fact that the rules on their authorisation and functioning were subject to national transposition of MiFID allowed for a wide margin of discretion, which has resulted in a lack of regulatory and supervisory convergence and unequal conditions that undermine and harm competition in the EU, particularly for entities and groups operating cross-border; all of this has hindered that trading operators develop their activity across several Member States (MS).
To put an end to the regulatory diversity resulting from the existence of different national regimes, the Master Regulation proposes that the requirements on the authorisation and functioning of regulated markets be transferred from the Directive to the new Regulation, with the aim of creating a ‘single regulatory code’ for trading venues.
Another proposed change is that the direct supervision of certain trading venues, specifically significant ones (i.e. those important to the EU economy and those with a significant cross-border dimension), PEMOs and trading venues operated by PEMOs, should be transferred to ESMA. National surveillance authorities⁵ would retain powers at local level to ensure market integrity, specifically, the supervision of orderly trading and the control of market abuse⁶.
In order to reduce administrative burdens, the reform addresses the specific case of market operators or investment firms that operate a trading venue and are part of a group, so that, when they enter into arrangements for resource or function allocation between group entities, they may benefit from these arrangements being treated as intra-group arrangements rather than outsourcing agreements, provided they meet certain requirements that facilitate their supervision. If an entity located outside the EU were involved in the intra-group arrangement, it would be considered an outsourcing agreement.
With regard to the cross-border activities that regulated markets may carry out and the authorisation enabling them to do so, the proposal includes clear rules that put an end to the vagueness of the current Directive and expressly allows regulated markets to freely offer the activity for which they have been authorised across the EU by virtue of the freedom to provide services or the right of establishment through a branch. This entails the establishment of appropriate mechanisms to facilitate access by members or participants from other Member States to that regulated market and remote trading on it (through ‘trading screens’)⁷, as well as activities relating to the admission of members or participants or activities concerning the admission to trading of a financial instrument. To ensure fairness and promote competition, the EC text prescribes the application of the same passport regime to all market operators and investment firms operating an MTF or an OTF.
Similarly, market operators who wish to operate regulated markets in more than one Member State may rely on a single individual authorisation: that of the competent authority of the home Member State, which is also responsible for its supervision. The possibility for Member States to require in their national legislation, as is currently the case in some of them, that the market operator establish a separate legal entity within their territory as a condition for the authorisation of a regulated market is removed. This amendment will lead to improvements in the efficiency of these entities’ corporate structures and a reduction in the costs and burdens they currently face.
Another significant development is the creation of the Pan-European Market Operator (PEMO) which, unlike the previous arrangement, will obtain the relevant single authorisation from ESMA to manage several trading venues across different Member States; this development is voluntary for those entities wishing to operate under a single authorisation. The authorisation must list all the trading venues that the PEMO is authorised to operate; if the PEMO wishes to expand its scope of operations to other trading venues, it must apply for an extension of the authorisation. As the trading venues operated by the PEMO do not need to hold individual authorisations, the PEMO must determine, for each of them, the Member State in whose territory each trading venue is deemed to be situated or operated.
Furthermore, new measures are proposed to facilitate access to the services of a central counterparty (CCP) or a trading venue. Current legislation may give rise to situations where there are restrictions or delays in the granting of access, both by a trading venue to a central counterparty (CCP) and by a CCP to a trading venue; additionally, trading venues may limit the ability of two market participants executing a transaction on their venue to freely choose two different CCPs, even where an interoperability arrangement exists between them. To address these situations, the proposal stipulates that access may only be denied where justified and in accordance with specific conditions; if there is a dispute between the parties, ESMA may intervene to reach a solution; the EC, furthermore, stipulates that CCPs may clear transactions in a non-discriminatory manner regardless of the trading venue on which a transaction was executed, and trading venues, in turn, may not restrict access to specific trading data where the counterparties to a specific transaction executed on their venue have not chosen the same CCP to clear it, provided that an interoperability arrangement exists between those CCPs.
⁵ The ‘national supervisory authority’ refers to the designated authority of the Member State in which (a) a trading venue is situated or operated and where ESMA is the competent authority in accordance with the provisions of the proposed text for Article 38fa regarding 1) PEMOs; 2) market operators that operate at least one significant trading venue or that are part of the same group of a CSD or CCP for which ESMA is the competent authority pursuant to Regulation (EU) No 909/2014 or Regulation (EU) No 648/2012; and 3) investment firms that operate at least one significant trading venue or that are part of the same group of a CSD or CCP for which ESMA is the competent authority pursuant to Regulation (EU) No 909/2014 or Regulation (EU) No 648/2012 with respect to the operation of MTFs or OTFs.
⁶ Specifically, in accordance with the provisions of the new Article 38fa introduced by the Master Regulation into MiFIR, national supervisory authorities retain, in respect of these market participants, the powers relating to the receipt of trade data, the ability to request order book data, or the adoption of emergency measures to impose temporary trading halts in emergency situations or to suspend or exclude one or more financial instruments from trading. Furthermore, national supervisory authorities may impose sanctions and other administrative measures.
⁷ This possibility was already provided for in MiFID II.
