The European Securities and Markets Authority (ESMA) has issued two proposed amendments to its draft Regulatory Technical Standards (RTSs) for the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). The proposals are in response to proposed amendments by the European Commission to these draft RTSs.

The two proposals are on:

1. the phase-in regime for non-equity transparency; and
2. the RTS on position limits for commodity derivatives.

Phase-in regime for non-equity transparency

The RTS on non-equity transparency includes requirements related to bonds, structured finance products, emission allowances and derivatives. In its statement, ESMA explains that it supports the more cautious transparency regime suggested by the EC but it proposes a different phase-in procedure. ESMA states: “The Commission procedure for a regular RTS change risks to result in no meaningful improvement of transparency for many non-equity instruments, which would run contrary to the objective stated in MiFIR to strengthen transparency and improve the functioning of the internal market. In addition, it creates legal uncertainty and is burdensome for all parties involved. Therefore, ESMA is proposing an automatic phase-in, with all the stages already prescribed in the RTS.”

The regulator also proposes an adjustment of the liquidity status of newly issued corporate and covered bonds by increasing the issuance size thresholds.

RTS on position limits for commodity derivatives

The second proposed amendment relates to the RTS on the methodology for the calculation and application of position limits for commodity derivatives. The Commission asked ESMA to consider a number of amendments for

• commodity derivatives with an agricultural underlying;
• the methodology in cases where deliverable supply and open interest of a contract differ significantly; and
• defining which contracts which are traded OTC only could be considered as economically equivalent to contracts traded on-venue.

ESMA says in its statement: “ESMA is supportive of most of the changes proposed by the Commission and understands the concerns about speculation and possible impacts on food prices. Therefore, ESMA proposes to lower the position limits for derivatives with foodstuffs as an underlying to 2.5%. In addition, ESMA suggests that in circumstances where deliverable supply and open interest diverge significantly, the other months’ position limits should be adjusted accordingly. Finally, the definition of contracts traded “OTC only” has been slightly widened in order to prevent circumventions of the position limits regime by trading OTC.”

RTS proposals on ancillary activities to be issued later in May

The Commission also asked ESMA to amend a third RTS on ancillary activities and ESMA's proposed amendments will be issued later in May 2016.

For full details of the proposals, see ESMA's statement here. 

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CTMfile take: The MiFID saga is continuing. You'd think they could all sit down at a table and thrash this thing out – but of course there are EU protocols to respect. In any case, it's important to get this regulation right first time, rather than wait until implementation in January 2018 to see if there are teething problems.