Media Briefing Note: Triple whammy of regulatory change as ESMA publishes draft technical standards for MiFID II, Market Abuse Regulation and CSD Regulation

28 September 2015 - The website of the European Securities and Markets Authority ("ESMA") was straining to cope with volumes of traffic today as the regulator published the draft technical standards required by the revised Markets in Financial Instruments Directive ("MiFID II"), the Market Abuse Regulation ("MAR") and the Central Securities Depositary Regulation (the "CSD Regulation").

Michael Thomas, partner in Hogan Lovells financial institutions group, said:

"To have ESMA simultaneously release three major publications on the same day highlights the scale of regulatory change facing the industry. This is important legislation that is going to shape the post-crisis regulatory landscape for years to come, and firms are going to have to expend significant time and cost to get to grips with these changes.

"However, bond market participants will be breathing a sigh of relief as ESMA has gone back on some of its previous proposals for pre-trade transparency.  This must be a sensible approach given the very significant industry pushback on this issue."
The draft technical standards clarify key points of MIFID II, MAR and the CSD Regulation, which will introduce wide-ranging changes to Europe's financial markets.

ESMA has revised its approach to pre-trade transparency for bonds in its MiFID II draft technical standards. ESMA has responded to concerns raised by the industry that ESMA's original proposals would have damaged price formation and potentially caused liquidity to dry up in the bond market. As a result, ESMA has adopted the industry's preference for measuring bond liquidity using the IBIA approach rather than COFIA.

Notes for editors:
Currently trading venues have to publish bid and offer prices in equities, but not non-equities such as bonds. MiFID II is intended to bring greater transparency to the bond market by requiring bid and offer information to be published for bonds that are sufficiently liquid. This is why the measurement of liquidity in bonds is a hotly contested issue in MiFID II.

ESMA previously proposed that liquidity in bonds should be measured by assessing the liquidity of distinct categories of instrument (the so-called Classes of Financial Instrument Approach, or "COFIA"). The preferred industry solution, which has now been adopted by ESMA, is a measurement of liquidity based on the liquidity of individual financial instruments, known as the Instrument by Instrument Approach ("IBIA").

The European Commission must now consider whether to adopt ESMA's draft technical standards as secondary legislation. MiFID II will take effect in the UK from 3 January 2017.
For further details on MIFID II, please visit the Hogan Lovells dedicated microsite at


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