Investment Firms Quarterly Legal And Regulatory Update

Author:Dillon Eustace
Profession:Dillon Eustace
 
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Markets in Financial Instruments Directive ("MiFID")

(i) ESMA publishes Q&A on contracts for difference and other speculative products

On 25 July 2016, the European Securities and Markets Authority ("ESMA") published an updated questions and answers document (the "Q&A") on the application of MiFID to the marketing and sale of financial contracts for difference ("CFDs") and other speculative products to retail clients.

The Q&A includes nine new questions and answers, which address the following topics:

The information provided to clients and potential clients about how CFDs and other speculative products work and the risks involved, including marketing communications; The assessment of appropriateness when offering CFDs or other speculative products to retail investors; and Factors for national competent authorities ("NCAs") to take into account when considering commercial arrangements between two authorised firms that result in the offer of CFDs or other speculative products to retail clients. The purpose of the Q&A is to promote common supervisory approaches and practices in the application of MiFID and its implementing measures to key aspects that are relevant when CFDs and other speculative products are sold to retail clients by providing responses to questions identified by NCAs in relation to practical aspects of the day-to-day supervision of firms involved in offering these products.

A copy of the Q&A is available at the following link:

https://www.esma.europa.eu/sites/default/files/library/2016-1165_qa_on_cfds_and_other_speculative_products_mifid.pdf

ESMA also published a warning about the sale of CFDs, binary options and other speculative products to retail investors who are unaware of the risks associated with such products which can be found at the following link:

https://www.esma.europa.eu/press-news/esma-news/esma-issues-warning-sale-speculative-products-retail-investors

Markets in Financial Instruments Directive II ("MiFID II")

(i) ESMA publishes Discussion Paper on Mandatory Trade Execution Obligations for OTC Derivatives under MiFIR

On 20 September 2016, ESMA published a discussion paper (the "Discussion Paper") on the trading obligations for derivatives under the Markets in Financial Instruments Regulation (Regulation (EU) 600/2014) ("MiFIR"). Under MiFIR certain derivatives will be required to be concluded on a regulated market, multilateral trading facility, organised trading facility or a trading venue in a third country that is declared equivalent under MiFIR (the "Trading Obligation").

MiFIR restricts the Trading Obligation to apply only to classes of derivatives that are: (i) admitted to trading or traded on at least one trading venue (the Trading Venue Test); and (ii) sufficiently liquid and have sufficient third-party buying and selling interest (the Liquidity Test).

The Discussion Paper is seeking feedback from stakeholders on the options put...

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