Market Abuse Regulation—market soundings
Market Abuse Regulation—market soundings

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • Market Abuse Regulation—market soundings
  • What is the definition of a market sounding?
  • The Market Abuse Regulation provisions in relation to market soundings
  • CLLS Q&As on market soundings
  • Level 3—ESMA Market Soundings Guidelines
  • Market Abuse Regulation (MAR)—timeline

What is the definition of a market sounding?

Recital 32 and Article 11(1) of the Market Abuse Regulation set out the definition of 'market sounding' as the communication of information prior to the announcement of a transaction to gauge the interest of potential investors in a possible transaction and the conditions relating to it, such as the potential size or pricing, to one or more potential investors. Recital 33 sets out examples of market soundings to include situations in which the sell-side firm has been in discussions with an issuer about a potential transaction and it has decided to gauge potential investor interest in order to determine the terms that will make up a transaction. Accordingly, the ability to conduct market soundings is important for the proper functioning of the financial markets and market soundings should not in themselves be regarded as market abuse. Interestingly ‘announcement’ is not defined and there has been some market discussion about what constitutes an announcement. Market consensus suggests that the more detailed the notice, the more likely it is to be an announcement. ESMA's September 2015 Final Report appeared to suggest that an announcement to conclude a transaction would not count as the type of announcement contained in the market soundings definition.

The Market Abuse Regulation provisions in relation to market