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How will a new Directive and Regulation on criminal sanctions for market abuse affect the financial sector? Christopher Robinson, partner, and Elisabeth Øverland, senior associate at Freshfields, discuss the ambitious package of market abuse reforms.
The Council of the European Union’s adoption of a Regulation and Directive on criminal sanctions for market abuse has been welcomed by the European Commission. The draft laws will mean existing market abuse rules will be broadened to include abuse on the electronic trading platforms that has proliferated in recent years. The proposed laws are expected to be published in the Official Journal in June 2014. Member states will have 24 months to implement the measures.
How will market abuse rules be broadened in light of this new Regulation?
Elisabeth Øverland (EO): There are a number of changes to the current regime.
Scope of the rules
One of the key changes relates to the scope of the investments that fall within the market abuse rules, which will be significantly expanded. The new regime will include financial instruments, such as derivatives and securities, traded on a much wider range of trading venues and platforms. Whereas the current Market Abuse Directive 2003/6/EC (MAD) broadly applies to financial instruments admitted to trading on a regulated market, the Market Abuse Regulation (the Regulation) expands the coverage of the market abuse regime to include financial instruments that are admitted multilateral trading facilities (MTF), as well as organised trading facilities (OTFs). Besides impacting those trading in such investments, the expanded scope imposes obligations on a new range of issuers and trading venues.
OTFs represent an entirely new trading venue category that is being introduced by the revised Markets in Financial Instruments Directive (MiFID II). This is potentially a significant expansion of the regime. Although the current UK market abuse regime does go beyond what’s required by the MAD, the Regulation extends that approach across the EU and to a much wider range of
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