# EUR-Lex - 52011PC0656 - EN

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# 52011PC0656

**Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on markets in financial instruments repealing Directive 2004/39/EC of the European Parliament and of the Council (Recast)  /* COM/2011/0656 final - 2011/0298 (COD) */**

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EXPLANATORY MEMORANDUM

1.
Context of the Proposal

The Markets in Financial Instruments
Directive (MiFID), in force since November 2007, is a core pillar in EU
financial market integration. Adopted in accordance with the
"Lamfalussy" process[1], it consists of a
framework Directive (Directive 2004/39/EC)[2], an
implementing Directive (Directive 2006/73/EC)[3] and an
implementing Regulation (Regulation No 1287/2006)[4].
MiFID establishes a regulatory framework for the provision of investment
services in financial instruments (such as brokerage, advice, dealing,
portfolio management, underwriting etc.) by banks and investment firms and for
the operation of regulated markets by market operators. It also establishes the
powers and duties of national competent authorities in relation to these
activities.

The overarching objective is to further the
integration, competitiveness, and efficiency of EU financial markets. In
concrete terms, it abolished the possibility for Member States to require all
trading in financial instruments to take place on traditional exchanges and
enabled Europe-wide competition between those exchanges and alternative venues.
It also granted banks and investment firms a strengthened "passport"
for providing investment services across the EU subject to compliance with both
organisational and reporting requirements as well as comprehensive rules
designed to ensure investor protection.

The result after 3.5 years in force is more
competition between venues in the trading of financial instruments, and more
choice for investors in terms of service providers and available financial
instruments, progress which has been compounded by technological advances.
Overall, transaction costs have decreased and integration has increased[5]

However, some problems have surfaced.
First, the more competitive landscape has given rise to new challenges. The
benefits from this increased competition have not flowed equally to all market
participants and have not always been passed on to the end investors, retail or
wholesale. The market fragmentation implied by competition has also made the
trading environment more complex, especially in terms of collection of trade
data. Second, market and technological developments have outpaced various
provisions in MiFID. The common interest in a transparent level playing-field
between trading venues and investment firms risks being undermined. Third, the
financial crisis has exposed weaknesses in the regulation of instruments other
than shares, traded mostly between professional investors. Previously held
assumptions that minimal transparency, oversight and investor protection in
relation to this trading is more conducive to market efficiency no longer hold.
Finally, rapid innovation and growing complexity in financial instruments
underline the importance of up-to-date, high levels of investor protection.
While largely vindicated amid the experience of the financial crisis, the
comprehensive rules of MiFID nonetheless exhibit the need for targeted but
ambitious improvements.

The revision of MiFID therefore constitutes
an integral part of the reforms aimed at establishing a safer, sounder, more
transparent and more responsible financial system working for the economy and
society as a whole in the aftermath of the financial crisis, as well as to ensure
a more integrated, efficient and competitive EU financial market.[6]
It is also an essential vehicle for delivering on the G20[7]
commitment to tackle less regulated and more opaque parts of the financial
system, and improve the organisation, transparency and oversight of various
market segments, especially in those instruments traded mostly over the counter
(OTC)[8], complementing the
legislative proposal on OTC derivatives, central counterparties and trade
repositories[9].

Targeted improvements are also required in
order to improve oversight and transparency of commodity derivative markets in
order to ensure their function for hedging and price discovery, as well as in
light of developments in market structures and technology in order to ensure
fair competition and efficient markets. Further, specific changes to the
framework of investor protection are necessary, taking account of evolving
practices and to support investor confidence.

Finally, in line with the recommendations
of from the de Larosière group and the conclusion of the ECOFIN Council,[10]
the EU has committed to minimise, where appropriate, discretions available to
Member States across EU financial services directives. This is a common thread
across all areas covered by the review of MiFID and will contribute to
establishing a single rulebook for EU financial markets, help further develop a
level playing field for Member States and market participants, improve
supervision and enforcement, reduce costs for market participants, and improve
conditions of access and enhance the global competitiveness of the EU financial
industry.

As a result, the proposal amending MiFID is
divided in two. A Regulation sets out requirements in relation to the
disclosure of trade transparency data to the public and transaction data to
competent authorities, removing barriers to non-discriminatory access to
clearing facilities, the mandatory trading of derivatives on organised venues,
specific supervisory actions regarding financial instruments and positions in
derivatives and the provision of services by third-country firms without a
branch. A Directive amends specific requirements regarding the provision of
investment services, the scope of exemptions from the current Directive,
organisational and conduct of business requirements for investment firms,
organisational requirements for trading venues, the authorisation and ongoing
obligations applicable to providers of data services, powers available to
competent authorities, sanctions, and rules applicable to third-country firms
operating via a branch.

2.
Results of consultations with the interested parties
and impact assessments

The initiative is the result of an extensive and continuous dialogue and
consultation with all major stakeholders, including securities regulators, all
types of market participants including issuers and retail investors. It takes
into consideration the views expressed in a public consultation from 8 December
2010 to 2 February 2011[11], a large and
well-attended public hearing was held over two days on 20-21 September 2010[12],
and input obtained through extensive meetings with a broad range of stakeholder
groups since December 2009. Finally, the proposal takes into consideration the
observations and analysis contained in the documents and technical advice
published by the Committee of European Securities Regulators (CESR), now the
European Securities and Markets Authority (ESMA)[13].

In addition, two studies[14]
have been commissioned from external consultants in order to prepare the
revision of MiFID. The first one, requested from PriceWaterhouseCoopers on 10
February 2010 and received on 13 July 2010, focused on data gathering on market
activities and other MiFID related issues. The second, from Europe Economics
mandated on the 21 July 2010 and received on 23 May 2011 focused on a cost
benefit analysis of the various policy options to be considered in the context
of the revision of MiFID.

In line with its "Better
Regulation" policy, the Commission conducted an impact assessment of
policy alternatives. Policy options were assessed against different criteria:
transparency of market operations for regulators and market participants,
investor protection and confidence, level playing field for market venues and
trading systems in the EU, and cost-effectiveness, i.e. the extent to which the
options achieve the sought objectives and facilitate the operation of
securities markets in a cost effective and efficient way.

Overall, the review of MiFID is estimated
to generate one-off compliance costs of between €512 and €732 million and
ongoing costs of between €312 and €586 million. This represents one-off and
ongoing cost impacts of respectively 0.10% to 0.15% and 0.06% to 0.12% of total
operating spending of the EU banking sector. This is far less than the costs
imposed at the time of the introduction of MiFID. The one-off cost impacts of
the introduction of MiFID were estimated at 0.56% (retail and savings banks)
and 0.68% (investment banks) of total operating spending while ongoing
compliance costs were estimated at 0.11% (retail and savings banks) to 0.17%
(investment banks) of total operating expenditure.

3.
Legal elements of the proposal
3.1.
Legal basis

The proposal is
based on Article 53(1) of the TFEU. This Directive would replace Directive
2004/39/EC with regard to the harmonisation of national provisions for the
authorisation governing the provision of investment services and the carrying
out of investment activities by investment firms, the acquisition of qualifying
holdings, the exercise of the freedom of establishment and of the freedom to
provide services, the powers of supervisory authorities of home and host Member
States in this regard, as well as the authorisation and operating conditions
for regulated markets and providers of market data. The main objective and
subject-matter of this proposal is to harmonise national provisions concerning
the access to the activity of investment firms, regulated markets and data
service providers, the modalities for their governance, and their supervisory
framework. The proposal is therefore based on Article 53(1) TFEU.

This proposal
is complementary to the proposed regulation [MiFIR], establishing uniform and
directly applicable requirements which are necessary for the even functioning
of the market in financial instruments in the field of, for example,
publication of trade data, transaction reporting to competent authorities, and
specific powers for competent authorities and ESMA.

3.2.
Subsidiarity and proportionality

According to the principle of subsidiarity
(Article 5.3 of the TFEU), action on EU level should be taken only when the
aims envisaged cannot be achieved sufficiently by Member States alone and can
therefore, by reason of the scale or effects of the proposed action, be better
achieved by the EU.

Most of the issues covered by the revision
are already covered by the current MiFID legal framework. Further, financial
markets are inherently cross-border in nature and are becoming more so. The
conditions according to which firms and operators can compete in this context,
whether it concerns rules on pre and post-trade transparency, investor
protection or the assessment and control of risks by market participants, need
to be common across borders and are all at the core of MiFID today. Action is
now required at European level in order to update and modify the regulatory
framework laid out by MiFID in order to take into account developments in
financial markets since its implementation. The improvements that the directive
has already brought to the integration and efficiency of financial markets and
services in Europe would thus be bolstered with appropriate adjustments to
ensure the objectives of a robust regulatory framework for the single market
are achieved. Because of this integration, isolated national intervention would
be far less efficient and would lead to the fragmentation of markets, resulting
in regulatory arbitrage and distortion of competition. For instance, different
levels of market transparency or investor protection across Member States would
fragment markets, compromise liquidity and efficiency, and lead to harmful
regulatory arbitrage.

The European Securities and Markets
Authority (ESMA) should also play a key role in the implementation of the new
EU-wide framework. Specific competences for ESMA are necessary in order to improve
the functioning of the single market in securities.

The proposal takes full account of the
principle of proportionality, namely that EU action should be adequate to reach
the objectives and does not go beyond what is necessary. It is compatible with
this principle, taking into account the right balance of the public interest at
stake and the cost-efficiency of the measure. The requirements imposed on the
different parties have been carefully calibrated. In particular, the need to
balance investor protection, efficiency of the markets and costs for the
industry has been central in laying out these requirements.

3.3.
Compliance with Articles 290 and 291 TFEU

On 23 September 2009, the Commission
adopted proposals for Regulations establishing EBA, EIOPA, and ESMA. In this
respect the Commission wishes to recall the Statements in relation to Articles
290 and 291 TFEU it made at the adoption of the Regulations establishing the
European Supervisory Authorities according to which: "As regards the
process for the adoption of regulatory standards, the Commission emphasises the
unique character of the financial services sector, following from the
Lamfalussy structure and explicitly recognised in Declaration 39 to the TFEU.
However, the Commission has serious doubts whether the restrictions on its role
when adopting delegated acts and implementing measures are in line with
Articles 290 and 291 TFEU."

3.4.
Detailed explanation of the proposal
3.4.1.
General – Level-playing field

A central aim of the proposal is to ensure
that all organised trading is conducted on regulated trading venues: regulated
markets, multilateral trading facilities (MTFs) and organised trading
facilities (OTFs). Identical pre and post trade transparency requirements will
apply to all of these venues. Likewise, the requirements in terms of
organisational aspects and market surveillance applicable to all three venues
are nearly identical. This will ensure a level playing field where there are
functionally similar activities bringing together third-party trading interests.
Importantly however, the transparency requirements will be calibrated for
different types of instruments, notably equity, bonds, and derivatives, and for
different types of trading, notably order book and quote driven systems.

In all three venues the operator of the
platform is neutral. Regulated markets and multilateral trading facilities are
characterised by non-discretionary execution of transactions. This means that
transactions will be executed according to predetermined rules. They also compete
to offer access to a broad membership provided they meet a transparent set of
criteria.

By contrast, the operator of an OTF has a
degree of discretion over how a transaction will be executed. Consequently, the
operator is subject to investor protection, conduct of business, and best
execution requirements towards the clients using the platform. . Thus, while
both the rules on access and execution methodology of an OTF have to be
transparent and clear, they allow the operator to perform a service to clients
which is qualitatively if not functionally different from the services provided
by regulated markets and MTFs to their members and participants. Still, in
order to ensure both the OTF operator's neutrality in relation to any
transaction taking place and that the duties owed to clients thus brought
together cannot be compromised by a possibility to profit at their expense, it
is necessary to prohibit the OTF operator from trading against his own
proprietary capital.

Finally, organised trading may also happen
by systematic internalisation. A systematic internaliser (SI) may execute
client transactions against his own proprietary capital. However, an SI may not
bring together third party buying and selling interests in functionally the
same was as a regulated market, MTF or OTF, and is therefore not a trading
venue. Best execution and other conduct of business rules would apply, and the
client would clearly know when he is trading with the investment firm and when
he is trading against third parties. Specific pre-trade transparency and access
requirements apply to SIs. Again, the transparency requirements will be
calibrated for different types of instruments, notably equity, bonds, and
derivatives and apply below specific thresholds. Any trading on own account by
investment firms with clients, including other investment firms, is thus
considered over-the counter (OTC). OTC trading activity which will not meet the
definition of SI activity, to be made more inclusive through amendments to
implementing legislation, will have to be non systematic and irregular.

3.4.2.
Extension of MiFID rules to like products and
services (Articles 1, 3, 4)

In the context of the work on packaged
retail investment products (PRIPs)[15], the Commission has
committed to ensuring a consistent regulatory approach based on MiFID
provisions for the distribution to retail investors of different financial
products which satisfy similar investor needs and raise comparable investor
protection challenges. Second, concerns regarding the applicability of MiFID
when investment firms or credit institutions issue and sell their own
securities have been raised. While the application of MiFID is clear when
investment advice is provided as part of the sale, greater clarity is needed in
the case of non-advised services, where the investment firm or bank could be
considered not to be providing a MiFID service. Finally, the disparity between
Member State rules applicable to locally active entities exempt from MiFID
offering a limited range of investment services is no longer tenable in view of
the lessons of the financial crisis, the complexity of financial markets and
products, and the need for investors to be able to rely on similar levels of
protection irrespective of the location or the nature of the service providers.

The proposals therefore extend MiFID
requirements, and particularly conduct of business and conflicts of interest
rules, to the advised and non-advised sale of structured deposits by credit
institutions, specify that MiFID also applies to investment firms and credit
institutions selling their own securities when not providing any advice, and
require Member States to apply authorisation and conduct of business
requirements analogous to MiFID in national legislation applicable to
locally-based entities.

3.4.3.
Revision of exemptions from MiFID (Article 2)

MiFID lists dealing on own account in
financial instruments among the investment services and activities requiring
authorisation. However, three key exemptions were introduced to exclude persons
who deal on own account as an exclusive activity, as an ancillary part of
another non-financial corporate activity, or as part of a non-financial
commodity-trading activity. In line with G20 commitments, the appropriate
coverage of MiFID provisions to firms providing investment services to clients
and carrying out investment activities on a professional basis should be
ensured. The proposals therefore limit the exemptions more clearly to
activities which are less central to MiFID and primarily proprietary or commercial
in nature, or which do not constitute high-frequency trading.

3.4.4.
Upgrades to the market structure framework
(Articles 18, 19, 20, 32, 33, 34, 53, 54)

Market developments since MiFID have
partially challenged the current regulatory framework applicable to different
types of execution venues, intended to underpin fair competition, a
level-playing field, and transparent and efficient markets. Its function and
design built mainly around equity-trading, the need to improve transparency and
resiliency in non-equity markets, and the fact that not all modes of organised
trading which have evolved in recent years adequately correspond to the
definitions and requirements of the three-pronged division foreseen in MiFID –
regulated markets, multilateral trading facilities, systematic internalisers –
all signal the need to provide for a refinement of the present framework. The
proposals create a new category for organised trading facilities which do not
correspond to any of the existing categories, underpinned by strong organisational
requirements and identical transparency rules, and upgrade key requirements
across all venues to account for the greater competition and cross-border
trading generated together by technological advances and MiFID.

3.4.5.
Improvements to corporate governance (Articles
9, 48)

MiFID requires persons who effectively
direct the business of an investment firm to be of sufficiently good repute and
sufficiently experienced as to ensure the sound and prudent management of the
investment firm. In line with the Commission's work on corporate governance in
the financial sector,[16] it is proposed to
strengthen these provisions with regard to the profile, role, responsibilities
of both executive and non-executive directors and balance in the composition of
management bodies. In particular, the proposals seek to ensure members of the
management body possess the sufficient knowledge and skills and comprehend the
risks associated with the activity of the firm in order to ensure the firm is
managed in a sound and prudent way in the interests of investors and market
integrity.

3.4.6.
Enhanced organisational requirements to
safeguard the efficient functioning and integrity of markets (Articles 16, 51)

Technological developments in the trading
of financial instruments present both opportunities and challenges. While the
effects are generally perceived as positive for market liquidity and to have
improved the efficiency of markets, specific regulatory and supervisory
measures have been identified as necessary in order to adequately deal with the
potential threats for the orderly functioning of markets arising from
algorithmic and high-frequency trading. In particular, the proposals aim to
bring all entities engaged in high-frequency trading into MiFID, require
appropriate organisational safeguards from these firms and those offering
market access to other high-frequency traders, and require venues to adopt
appropriate risk controls to mitigate disorderly trading and ensure the
resiliency of their platforms. They also aim to assist the oversight and
monitoring of such activities by competent authorities.

3.4.7.
Enhancement of the investor protection framework
(Articles 13, 24, 25, 27, 29, Annex I – Section A)

MiFID is generally acknowledged to have
improved the protection of both retail and professional investors. Nonetheless,
experience indicates that modifications in a number of areas would help to
mitigate cases where the possibilities for investor detriment are most acute.
Notably the proposals strengthens the regulatory framework for the provision of
investment advice and portfolio management and the possibility for investment
firms to accept incentive by third parties (inducements) as well as it clarifies
the conditions and arrangements under which investors are able to transact
freely in the market in certain non-complex instruments with minimal duties or
protections afforded on behalf of their investment firm. Furthermore, it
introduces a framework to deal with cross-selling practices in order to ensure
that investors are properly informed and that these practices are not
detrimental for them. The proposal reinforces the requirements concerning the
handling of funds or instruments belonging to clients by investment firms and
their agents and classifies as an investment service the safekeeping of
financial instruments on behalf of clients. The proposal helps improving the
information to clients in relation to the services provided to them and to the
execution of their orders.

3.4.8.
Heightened protections in the provision of
investment services to non-retail clients (Article 30, Annex II)

The MiFID classification of clients into
retail, professional and eligible counterparties provides an adequate and
satisfactory degree of flexibility and should thus largely remain unchanged.
Nonetheless, extensive examples concerning transactions in complex instruments
by local authorities and municipalities have demonstrated that their
classification is inadequately reflected in the MiFID framework. Second, while
many detailed conduct of business requirements are not meaningful in the
relationship between eligible counterparties in their multiple daily dealings,
the overarching high level principle to act honestly, fairly and professionally
and the obligation to be fair, clear and not misleading should apply irrespective
of client categorization. Finally, it is proposed that eligible counterparties
benefit from better information and documentation for services provided.

3.4.9.
New requirements for trading venues (Articles 27,
59, 60)

Assessing best execution in MiFID today
hinges on the availability of pre- and post-trade transparency data.
Nevertheless, other information such as the number of orders cancelled prior to
execution or the speed of execution can also be relevant. The proposal
therefore introduces a requirement for trading venues to publish annual data on
execution quality. Second, commodity derivative contracts traded on trading
venues frequently attract the broadest participation by users and investors and
can often serve as a benchmark price discovery venues feeding into, for
example, retail energy and food prices. It is therefore proposed that all
trading venues on which commodity derivative contracts are traded adopt
appropriate limits or alternative arrangements to ensure the orderly
functioning of the market and settlement conditions for physically delivered
commodities, and provide systematic, granular and standardised information on
positions by different types of financial and commercial traders to regulators
(including the category and identity of the end-client) and market
participants (including only aggregate positions of categories of end-clients).
The limits to be adopted by these venues may be
harmonised in delegated acts by the Commission, and neither they nor any
alternative arrangements are without prejudice to the ability of competent
authorities and ESMA, pursuant to this Directive and MiFIR, to impose
additional measures when necessary.

3.4.10.
An improved regime for SME markets (Article 35)

To complement various recent EU initiatives
to assist SMEs in obtaining financing, it is proposed to create a new
subcategory of markets known as SME growth markets. An operator of such a
market (which are usually operated as MTFs) could elect to apply to have the
MTF also registered as an SME growth market if it meets certain conditions. The
registration of these markets should raise their visibility and profile and
help lead to common pan European regulatory standards for such markets, that
are tailored to take into account the needs of issuers and investors in these
markets while maintaining existing high levels of investor protection.

3.4.11.
Third country regime (Articles 41-50)

The proposal creates a harmonised framework
for granting access to EU markets for firms and market operators based in third
countries in order to overcome the current fragmentation into national third
country regimes and to ensure a level playing field for all financial services
actors in the EU territory. The proposal introduces a regime based on a
preliminary equivalence assessment of third country jurisdictions by the
Commission. Third country firms from third countries for which an equivalence
decision has been adopted would be able to request to provide services in the
Union. The provision of services to retail clients would require the establishment
of a branch; the third country firm should be authorised in the Member State
where the branch is established and the branch would be subject to EU
requirements in some areas (organisational requirements, conduct of business
rules, conflicts of interest, transparency and others). Services provided to
eligible counterparties would not require the establishment of a branch; third
country firms could provide them subject to ESMA registration. They would be
supervised in their country. Appropriate cooperation agreement between the
supervisors in third countries and national competent authorities and ESMA
would be necessary.

3.4.12.
Increased and more efficient data consolidation
(Articles 61-68)

The area of market data in terms of
quality, format, cost and ability to consolidate is key to sustain the
overarching principle of MiFID as regards transparency, competition and
investor protection. In this area, the proposed provisions in the Regulation
and the Directive bring in a number of fundamental changes.

The provisions will improve the quality and
consistency of data by requiring that all firms publish their trade reports
through Approved Publication Arrangement (APA). The provisions set procedures
for competent authority to authorise the APAs and set organisational
requirements for the APAs.

The proposed provisions will address one of
the main criticisms made on the effects of the implementation of MiFID, which
is data fragmentation. Besides requiring market data to be reliable, timely and
available at a reasonable cost, it is crucial for investors that market data
can be brought together in a way that allows efficient comparison of prices and
trades across venues. The multiplication of market venues further to the
implementation of MiFID has made this exercise more difficult. The proposed
provisions set the conditions for the emergence of consolidated tape providers.
It defines the organisational requirements that such providers will need to
meet in order to be able to operate such a scheme.

3.4.13.
Heightened powers over derivative-positions for
competent authorities (Articles 61, 72, 83)

As a result of the significant growth in
the size of derivative markets in recent years, the proposals would overcome
the current fragmentation in the powers of regulators to monitor and supervise
positions. In the interests of the orderly functioning of markets or market
integrity, they would be bestowed with explicit powers to demand information
from any person regarding the positions held in the derivative instruments
concerned as well as in emission allowances. The supervisory authorities would
be able to intervene at any stage during the life of a derivative contract and
take action that a position be reduced. This heightened position management
would be complemented by the possibility to limit positions in an ex-ante,
non-discriminatory fashion. All actions should be notified to ESMA.

3.4.14.
Effective sanctions (Articles 73-78)

Member States should provide that
appropriate administrative sanctions and measures can be applied to breaches of
MiFID. To this end, the Directive will require them to comply with the
following minimum rules.

First, administrative sanctions and
measures should apply to those natural or legal persons and to investment firms
responsible for a breach.

Second, in the case of a breach of
provisions of this Directive and the Regulation, a minimum set of
administrative sanctions and measures should be available to competent
authorities. This includes withdrawal of authorisation, public statement,
dismissal of management, administrative pecuniary sanctions.

Third, the maximum level of administrative
pecuniary sanctions laid down in national legislation should exceed the
benefits derived from the breach if they can be determined and, in any case,
should not be lower than the level provided for by the Directive.

Fourth, the criteria taken into account by
competent authorities when determining the type and level of the sanction to be
applied in a particular case should include at least the criteria set out in
the Directive (eg. benefits derived from the violation or losses caused to
third parties, cooperative behaviour of the responsible person, etc).

Fifth, sanctions and measures applied
should be published, as provided in this Directive.

Finally, appropriate mechanism should be put
in place to encourage reporting of breaches within investment firms.

Criminal sanctions are not covered by this
proposal.

3.4.15.
Emission allowances (Article Annex I, Section C)

Unlike trading in derivatives, spot
secondary markets in EU emission allowances (EUAs) are largely unregulated. A
range of fraudulent practices have occurred in spot markets which could
undermine trust in the emissions trading scheme (ETS), set up by the EU ETS
Directive[17]. In parallel to measures
within the EU ETS Directive to reinforce the system of EUA registries and
conditions for opening an account to trade EUAs, the proposal would render the
entire EUA market subject to financial market regulation. Both spot and
derivative markets would be under a single supervisor. MiFID and the Directive
2003/6/EC on market abuse would apply, thereby comprehensively upgrading the
security of the market without interfering with its purpose, which remains
emissions reduction. Moreover, this will ensure coherence with the rules
already applying to EUA derivatives and lead to greater security as banks and
investment firms, entities obliged to monitor trading activity for fraud, abuse
or money laundering, would assume a bigger role in vetting prospective spot
traders.

4.
Budgetary implication

The specific budget implications of the
proposal relate to task allocated to ESMA as specified in the legislative
financial statements accompanying this proposal. Specific budgetary
implications for the Commission are also assessed in the financial statement
accompanying this proposal.

The proposal has implications for the
Community budget.

ê2004/39/EC

ð new

2011/0298 (COD)

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

on markets in financial instruments
repealing Directive 2004/39/EC of the European Parliament and of the Council
 (Recast)

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty ð on the functioning of the European
Union ï establishing the European Community,
and in particular Article 53(1)47(2)
thereof,

Having regard to the proposal from the
Commission[18],

ð After transmission of the right
legislative act to the national Parliaments, ï

Having regard to the Opinion of the
European Economic and Social Committee[19],

Having regard to the opinion of the
European Central Bank[20],

ð After consulting the European Data
Protection Supervisor, ï

Acting in accordance with the ð ordinary legislative ï procedure laid down in Article 251 of the
Treaty[21],

Whereas:

ò new

(1)
Directive 2004/39/EC
of the European Parliament and of the Council of 21 April 2004 on markets in
financial instruments amending Council Directives 85/611/EEC and 93/6/EEC
and Directive 2000/12/EC of the European Parliament and of the Council and
repealing Council Directive 93/22/EEC[22] has been substantially amended
several times. Since further amendments are to be made, it should be recast in
the interests of clarity.

ê 2004/39/EC
recital1

(2)       Council
Directive 93/22/EEC of 10 May 1993 on investment services in the
securities field[23] sought to establish the
conditions under which authorised investment firms and banks could provide
specified services or establish branches in other Member States on the basis of
home country authorisation and supervision. To this end, that Directive
aimed to harmonise the initial authorisation and operating requirements for investment
firms including conduct of business rules. It also provided for the
harmonisation of some conditions governing the operation of regulated markets.

ê 2004/39/EC
recital 2 (adapted)

(3)       In recent years more
investors have become active in the financial markets and are offered an even
more complex wide-ranging set of services and instruments. In view of these
developments the legal framework of the Community Ö Union Õ should
encompass the full range of investor-oriented activities. To this end, it is
necessary to provide for the degree of harmonisation needed to offer investors
a high level of protection and to allow investment firms to provide services
throughout the Community
Ö Union Õ , being a
Single Market, on the basis of home country supervision. In view of the
preceding, Directive 93/22/EEC wasshould
be replaced by a new Directive 2004/39/EC.

ò new

(4)       The
financial crisis has exposed weaknesses in the functioning and in the
transparency of financial markets. The evolution of financial markets have
exposed the need to strengthen the framework for the regulation of markets in
financial instruments in order to increase transparency, better protect
investors, reinforce confidence, reduce unregulated areas, ensure that
supervisors are granted adequate powers to fulfil their tasks.

ò new

(5)       There
is agreement among regulatory bodies at international level that weaknesses in
corporate governance in a number of financial institutions, including the
absence of effective checks and balances within them, have been a contributory
factor to the financial crisis. Excessive and imprudent risk taking may lead to
the failure of individual financial institutions and systemic problems in
Member States and globally. Incorrect conduct of firms providing services to
clients may lead to investor detriment and loss of investor confidence. In
order to address the potentially detrimental effect of these weaknesses in corporate
governance arrangements, the provisions of this Directive should be
supplemented by more detailed principles and minimum standards. These
principles and standards should apply taking into account the nature, scale and
complexity of investment firms.

ò new

(6)       The
High Level Group on Financial Supervision in the European Union invited the
European Union to develop a more harmonised set of financial regulation. In the
context of the future European supervision architecture, the European Council
of 18 and 19 June 2009 also stressed the need to establish a European single
rule book applicable to all financial institutions in the Single Market.

ò new

(7)       In
the light of the above, Directive 2004/39/EC is now partly recast as this new
Directive and partly replaced by Regulation (EU) No .../... (MiFIR). Together, both legal instruments should
form the legal framework governing the requirements applicable to investment
firms, regulated markets, data reporting services providers and third country
firms providing investment services or activities in the Union. This Directive
should therefore be read together with the Regulation. This Directive should contain the provisions
governing the authorisation of the business, the acquisition of qualifying
holding, the exercise of the freedom of establishment and of the freedom to
provide services, the operating conditions for investment firms to ensure
investor protection, the powers of supervisory authorities of home and host
Member States, the sanctioning regime. Since the main objective and
subject-matter of this proposal is to harmonise national provisions concerning
the mentioned areas, the proposal should be based on Article 53(1) TFEU. The
form of a Directive is appropriate in order to enable the implementing
provisions in the areas covered by this Directive, when necessary, to be
adjusted to any existing specificities of the particular market and legal
system in each Member State.

ê 2004/39/EC
recital 3

(3)       Due to the increasing dependence of investors on personal
recommendations, it is appropriate to include the provision of investment
advice as an investment service requiring authorisation.

ê 2004/39/EC
recital 4

(8)(4)   It is
appropriate to include in the list of financial instruments certain commodity
derivatives and others which are constituted and traded in such a manner as to
give rise to regulatory issues comparable to traditional financial instruments.

ò new

(9)       A
range of fraudulent practices have occurred in spot secondary markets in
emission allowances (EUA) which could undermine trust in the emissions trading
schemes, set up by Directive 2003/87/EC, and measures are being taken to
strengthen the system of EUA registries and conditions for opening an account
to trade EUAs. In order to reinforce the integrity and safeguard the efficient
functioning of those markets, including comprehensive supervision of trading
activity, it is appropriate to complement measures taken under Directive 2003/87/EC
by bringing emission allowances fully into the scope of this Directive and of Regulation
----/-- [Market Abuse Regulation], by classifying them as financial instruments.

ê 2004/39/EC
recital 7 (adapted)

(10)(7) The purpose of this Directive
is to cover undertakings the regular occupation or business of which is to
provide investment services and/or perform investment activities on a
professional basis. Its scope should not therefore cover any person with a
different professional activity.

ê 2004/39/EC
recital 5

(11)     It is necessary to establish a comprehensive regulatory regime
governing the execution of transactions in financial instruments irrespective
of the trading methods used to conclude those transactions so as to ensure a
high quality of execution of investor transactions and to uphold the integrity
and overall efficiency of the financial system. A coherent and risk-sensitive
framework for regulating the main types of order-execution arrangement
currently active in the European financial marketplace should be provided for.
It is necessary to recognise the emergence of a new generation of organised
trading systems alongside regulated markets which should be subjected to
obligations designed to preserve the efficient and orderly functioning of
financial markets. With a view to establishing a proportionate regulatory framework
provision should be made for the inclusion of a new investment service which
relates to the operation of an MTF.

ê 2004/39/EC
recital 6

(12)(6) Definitions of regulated market and MTF should be
introduced and closely aligned with each other to reflect the fact that they
represent the same organised trading functionality. The definitions should
exclude bilateral systems where an investment firm enters into every trade
on own account and not as a riskless counterparty interposed between the buyer
and seller. The term ‘system’ encompasses all those markets that are composed
of a set of rules and a trading platform as well as those that only function on the basis of a set of rules. Regulated
markets and MTFs are not obliged to operate a ‘technical’ system for matching
orders. A market which is only composed of a set of rules that governs aspects
related to membership, admission of instruments to trading, trading between
members, reporting and, where applicable, transparency obligations is a
regulated market or an MTF within the meaning of this Directive and the
transactions concluded under those rules are considered to be concluded under
the systems of a regulated market or an MTF.
The term ‘buying and selling interests’ is to be understood in a broad sense
and includes orders, quotes and indications of interest. The requirement that
the interests be brought together in the system by means of non-discretionary
rules set by the system operator means that they are brought together under the
system's rules or by means of the system's protocols or internal operating
procedures (including procedures embodied in computer software). The term
‘non-discretionary rules’ means that these
rules leave the investment firm operating an MTF with no discretion as to how
interests may interact. The definitions require that interests be brought
together in such a way as to result in a contract, meaning that execution
takes place under the system's rules or by means of the system's protocols or
internal operating procedures.

ò new

(12)     All
trading venues, namely regulated markets, MTFs, and OTFs, should lay down
transparent rules governing access to the facility. However, while regulated
markets and MTFs should continue to be subject to highly similar requirements
regarding whom they may admit as members or participants, OTFs should be able
to determine and restrict access based inter alia on the role and obligations which
their operators have in relation to their clients.

ò new

(13)     An
investment firm executing client orders against own proprietary capital should be
deemed a systematic internaliser, unless the transactions are carried out
outside regulated markets, MTFs and OTFs on an occasional, ad hoc and irregular
basis. Systematic internalisers should be defined as investment firms which, on
an organised, frequent and systematic basis, deal on own account by executing
client orders outside a regulated market, an MTF or an OTF. In order to ensure
the objective and effective application of this definition to investment firms,
any bilateral trading carried out with clients should be relevant and
quantitative criteria should complement the qualitative criteria for the
identification of investment firms required to register as systematic
internalisers, laid down in Article 21 of Commission Regulation No 1287/2006
implementing Directive 2004/39/EC. While an OTF is any system or facility in
which multiple third party buying and selling interests interact in the system,
a systematic internaliser should not be allowed to bring together third party
buying and selling interests.

ê 2004/39/EC
recital 8 (adapted)

ð new

(14)(8) Persons
administering their own assets and undertakings, who do not provide investment
services and/or perform investment activities other than dealing on own account
ð should not be covered by the scope
of this Directive ï unless they are market makers ð , members or participants of a
regulated market or MTF or they execute orders from clients by dealing ï or they
deal on own account outside a regulated market or an MTF on an
organised, frequent and systematic basis, by providing a system accessible
to third parties in order to engage in dealings with them should not be covered
by the scope of this Directive. ð By way of exception, persons who
deal on own account in financial instruments as members or participants of a
regulated market or MTF, including as market makers in relation to commodity
derivatives, emission allowances, or derivatives thereof, as an ancillary
activity to their main business, which on a group basis is neither the
provision of investment services within the meaning of this Directive nor of
banking services within the meaning of Directive 2006/48/EC, should not be
covered by the scope of this Directive. Technical criteria for when an activity
is ancillary to such a main business should be clarified in delegated acts. Dealing
on own account by executing client orders should include firms executing orders
from different clients by matching them on a matched principal basis (back to
back trading), which should be regarded as acting as principals and should be
subject to the provisions of this Directive covering both the execution of
orders on behalf of clients and dealing on own account. The execution of orders
in financial instruments as an ancillary activity between two persons whose
main business, on a group basis, is neither the provision of investment
services within the meaning of this Directive nor of banking services within
the meaning of Directive 2006/48/EC should not be considered as dealing on own
account by executing client orders. ï

ê 2004/39/EC
recital 9

(15)(9) References in
the text to persons should be understood as including both natural and legal
persons.

ê 2004/39/EC
recital 10 (adapted)

(16)(10)           Insurance
or assurance undertakings the activities of which are subject to appropriate
monitoring by the competent prudential-supervision authorities and which are
subject to Council Directive 64/225/EEC of 25 February 1964
on the abolition of restrictions on freedom of establishment and freedom to
provide services in respect of reinsurance and retrocession[24],
First Council Directive 73/239/EEC of 24 July 1973 on the
coordination of laws, regulations and administrative provisions relating to the
taking up and pursuit of direct insurance other than
life assurance[25]
and
Council Directive 2002/83/EC of 5 November 2002 concerning life
assurance[26]
Ö Directive
2009/138/EC of the European Parliament and of
the Council of 25 November 2009 on the taking-up and pursuit of the business of
Insurance and Reinsurance (Solvency II)[27] Õ should be
excluded.

ê 2004/39/EC
recital 11

(17)(11)           Persons
who do not provide services for third parties but whose business consists in
providing investment services solely for their parent undertakings, for their
subsidiaries, or for other subsidiaries of their parent undertakings should not
be covered by this Directive.

ê 2004/39/EC
recital 12

(18)(12)           Persons
who provide investment services only on an incidental basis in the course of
professional activity should also be excluded from the scope of this Directive,
provided that activity is regulated and the relevant rules do not prohibit the
provision, on an incidental basis, of investment services.

ê 2004/39/EC
recital 13

(19)(13)           Persons
who provide investment services consisting exclusively in the administration of
employee-participation schemes and who therefore do not provide investment
services for third parties should not be covered by this Directive.

ê 2004/39/EC
recital 14

(20)(14)           It
is necessary to exclude from the scope of this Directive central banks and
other bodies performing similar functions as well as public bodies charged with
or intervening in the management of the public debt, which concept covers the
investment thereof, with the exception of bodies that are partly or wholly
State-owned the role of which is commercial or linked to the acquisition of
holdings.

ò new

(21)     In
order to clarify the regime of exemptions for the European System of Central
Banks, other national bodies performing similar functions and the bodies
intervening in the management of public debt, it is appropriate to limit such exemptions
to the bodies and institutions performing their functions in accordance with
the law of one Member State or in accordance with the legislation of the Union
as well as to international bodies of which one or more Member States are
members.

ê 2004/39/EC
recital 15 (adapted)

(22)(15)           It
is necessary to exclude from the scope of this Directive collective
investment undertakings and pension funds whether or not coordinated at Community
Ö Union Õ level, and the
depositaries or managers of such undertakings, since they are subject to
specific rules directly adapted to their activities.

ê 2004/39/EC
recital 16

(23)(16)           In
order to benefit from the exemptions from this Directive the person concerned
should comply on a continuous basis with the conditions laid down for such
exemptions. In particular, if a person provides investment services or
performs investment activities and is exempted from this Directive because such
services or activities are ancillary to his main business, when considered on a
group basis, he should no longer be covered by the exemption related to
ancillary services where the provision of those services or activities ceases
to be ancillary to his main business.

ê 2004/39/EC
recital 17

(24)(17)           Persons
who provide the investment services and/or perform investment activities
covered by this Directive should be subject to authorisation by their home
Member States in order to protect investors and the stability of the financial
system.

ê 2004/39/EC
recital 18 (adapted)

(25)(18)           Credit
institutions that are authorised under Directive 2000/12/EC Ö 2006/48/EC Õ of the
European Parliament and of the Council of 20 March 2000
Ö 14 June
2006 Õ relating to
the taking up and pursuit of the business of credit institutions Ö (recast) Õ Ö [28] Õ should not
need another authorisation under this Directive in order to provide investment
services or perform investment activities. When a credit institution decides to
provide investment services or perform investment activities the competent
authorities, before granting an authorisation, should verify that it complies
with the relevant provisions of this Directive.

ò new

(26)     Structured
deposits have emerged as a form of investment product but are are not covered
under any legislation for the protection of investors at Union level, while
other structured investments are covered by such legislation. It is appropriate
therefore to strengthen the confidence of investors and to make regulatory
treatment concerning the distribution of different packaged retail investment
products more uniform in order to ensure an adequate level of investor protection
across the Union. For this reason, it is appropriate to include in the scope of
this Directive structured deposits. In this regard, it is necessary to clarify
that since structured deposits are a form of investment product, they do not
include deposits linked solely to interest rates, such as Euribor or Libor,
regardless of whether or not the interest rates are predetermined, or are fixed
or variable.

ò new

(27)     In
order to strengthen the protection of investors in the Union, it is appropriate
to limit the conditions under which Member States can exclude the application
of this Directive to persons providing investment services to clients who, as a
result, are not protected under the Directive. In particular, it is appropriate
to require Member States to apply requirements at least analogous to the ones laid
down in this Directive to those persons, notably in the phase of authorisation,
in the assessment of their reputation and experience and of the suitability of
any shareholders, in the review of the conditions for initial authorisation and
on-going supervision as well as on conduct of business obligations.

ê 2004/39/EC
recital 19

(28)(19)           In
cases where an investment firm provides one or more investment services not
covered by its authorisation, or performs one or more investment activities not
covered by its authorisation, on a non-regular basis it should not need an
additional authorisation under this Directive.

ê 2004/39/EC
recital 20

(29)(20)           For
the purposes of this Directive, the business of the reception and transmission
of orders should also include bringing together two or more investors thereby
bringing about a transaction between those investors.

ò new

(30)     Investment
firms and credit institutions distributing financial instruments they issue themselves
should be subject to the provisions of this Directive when they provide
investment advice to their clients. In order to eliminate uncertainty and
strengthen investor protection, it is appropriate to provide for the
application of this Directive when, in the primary market, investment firms and
credit institutions distribute financial instruments issued by them without
providing any advice. For this purpose, the definition of the service of
execution of orders on behalf of clients should be extended.

ê 2004/39/EC
recital 21(adapted)

(21)     In the
context of the forthcoming revision of the Capital Adequacy framework in Basel
II, Member States recognise the need to re-examine whether or not investment firms who execute client orders on a matched
principal basis are to be regarded as acting as principals, and thereby be
subject to additional regulatory capital requirements.

ê 2004/39/EC
recital 22

(31)(22)           The
principles of mutual recognition and of home Member State supervision require
that the Member States' competent authorities should not grant or should
withdraw authorisation where factors such as the content of programmes of
operations, the geographical distribution or the activities actually carried on
indicate clearly that an investment firm has opted for the legal system of one
Member State for the purpose of evading the stricter standards in force in
another Member State within the territory of which it intends to carry on or
does carry on the greater part of its activities. An investment firm which
is a legal person should be authorised in the Member State in which it has its
registered office. An investment firm which is not a legal person should be authorised
in the Member State in which it has its head office. In addition, Member
States should require that an investment firm's head office must
always be situated in its home Member State and that it actually operates
there.

ò new

(32)     Directive
2007/44/EC of the European Parliament and of the Council of 5 September
2007 amending Council Directive 92/49/EEC and Directives 2002/83/EC,
2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and
evaluation criteria for the prudential assessment of acquisitions and increase
of holdings in the financial sector[29] has provided for
detailed criteria for the prudential assessment of proposed acquisitions in an
investment firm and for a procedure for their application. In order to provide
legal certainty, clarity and predictability with regard to the assessment
process, as well as to the result thereof, it is appropriate to confirm the
criteria and the process of prudential assessment laid down in Directive
2007/44/EC. In particular, competent authorities should appraise the
suitability of the proposed acquirer and the financial soundness of the
proposed acquisition against all of the following criteria: the reputation of
the proposed acquirer; the reputation and experience of any person who will direct
the business of the investment firm; the financial soundness of the proposed
acquirer; whether the investment firm will be able to comply with the
prudential requirements based on this Directive and other Directives, notably,
Directives 2002/87/EC[30] and 2006/49/EC[31];
whether there are reasonable grounds to suspect that money laundering or
terrorist financing within the meaning of Article 1 of Directive
2005/60/EC[32] is being or has been
committed or attempted, or that the proposed acquisition could increase the
risk thereof.

ê 2004/39/EC
recital 23 (adapted)

(33)(23)           An
investment firm authorised in its home Member State should be entitled to
provide investment services or perform investment activities throughout the Community
Ö Union Õ without the
need to seek a separate authorisation from the competent authority in the
Member State in which it wishes to provide such services or perform such
activities.

ê 2004/39/EC
recital 24 (adapted)

(34)(24)           Since
certain investment firms are exempted from certain obligations imposed by Council
Directive 93/6/EEC of 15 March 1993 Ö 2006/49/EC
of the European Parliament and of the Council of 14 June 2006 Õ on the capital
adequacy of investment firms and credit institutions Ö (recast) Õ Ö [33] Õ , they should
be obliged to hold either a minimum amount of capital or professional indemnity
insurance or a combination of both. The adjustments of the amounts of that
insurance should take into account adjustments made in the framework of
Directive 2002/92/EC of the European Parliament and of
the Council of 9 December 2002 on insurance mediation[34].
This particular treatment for the purposes of capital adequacy should be
without prejudice to any decisions regarding the appropriate treatment of these
firms under future changes to Community Ö Union Õ legislation on
capital adequacy.

ê 2004/39/EC
recital 25

(35)(25)           Since
the scope of prudential regulation should be limited to those entities which,
by virtue of running a trading book on a professional basis, represent a source
of counterparty risk to other market participants, entities which deal on own
account in financial instruments, including those commodity derivatives covered
by this Directive, as well as those that provide investment services in
commodity derivatives to the clients of their main business on an ancillary
basis to their main business when considered on a group basis, provided that
this main business is not the provision of investment services within the
meaning of this Directive, should be excluded from the scope of this Directive.

ê 2004/39/EC
recital 26

(36)(26)           In
order to protect an investor's ownership and other similar rights in respect of
securities and his rights in respect of funds entrusted to a firm those rights
should in particular be kept distinct from those of the firm. This principle
should not, however, prevent a firm from doing business in its name but on
behalf of the investor, where that is required by the very nature of the
transaction and the investor is in agreement, for example stock lending.

ê 2004/39/EC
recital 27 (adapted)

ð new

(37)(27)           Where a client, in line
with Community legislation and in particular Directive 2002/47/EC of the
European Parliament and of the Council of 6 June 2002 on
financial collateral arrangements[35], transfers full
ownership of financial instruments or funds to an investment firm for
the purpose of securing or otherwise covering present or future, actual or
contingent or prospective obligations, such financial instruments or funds
should likewise no longer be regarded as belonging to the client.ð The requirements concerning the
protection of client assets are a crucial tool for the protection of clients in
the provision of services and activities. These requirements can be excluded
when full ownership of funds and financial instrument is transferred to an
investment firm to cover any present or future, actual or contingent or
prospective obligations. This broad possibility may create uncertainty and
jeopardise the effectiveness of the requirements concerning the safeguard of
client assets. Thus, at least when retail clients' assets are involved, it is
appropriate to limit the possibility of investment firms to conclude title
transfer financial collateral arrangements as defined under Directive
2002/47/EC of the European Parliament and of the Council of 6 June 2002 on
financial collateral arrangements[36], for the purpose of
securing or otherwise covering their obligations. ï

ê 2004/39/EC
recital 28

(28)     The procedures for the authorisation, within the
Community, of branches of investment firms authorised in third countries
should continue to apply to such firms. Those branches should not enjoy the
freedom to provide services under the second paragraph of Article 49 of
the Treaty or the right of establishment in Member States other than those in which they are established. In view of cases
where the Community is not bound by any bilateral or multilateral obligations
it is appropriate to provide for a procedure intended to ensure that Community
investment firms receive reciprocal treatment in the third countries
concerned.

ò new

(38)     It
is necessary to strengthen the role of management bodies of investment firms in
ensuring sound and prudent management of the firms, the promotion of the
integrity of the market and the interest of investors. The management body of
an investment firm should at all time commit sufficient time and possess
adequate knowledge, skills and experience to be able to understand the business
of the investment firm and its main risk. To avoid group thinking and
facilitate critical challenge, management boards of investment firms should be
sufficiently diverse as regards age, gender, provenance, education and
professional background to present a variety of views and experiences. Gender balance
is of a particular importance to ensure adequate representation of
demographical reality.

ò new

(39)     In
order to have an effective oversight and control over the activities of
investment firms, the management body should be responsible and accountable for
the overall strategy of the investment firm, taking into account the investment
firm's business and risk profile. The management body should assume clear
responsibilities across the business cycle of the investment firm, in the areas
of the identification and definition of the strategic objectives of the firm,
of the approval of its internal organization, including criteria for selection
and training of personnel, of the definition of the overall policies governing
the provision of services and activities, including the remuneration of sales
staff and the approval of new products for distribution to clients. Periodic
monitoring and assessment of the strategic objectives of investment firms,
their internal organization and their policies for the provision of services
and activities should ensure their continuous ability to deliver sound and
prudent management, in the interest of the integrity of the markets and the
protection of investors.

ê 2004/39/EC
recital 29

(40)(29)           The
expanding range of activities that many investment firms undertake
simultaneously has increased potential for conflicts of interest between those
different activities and the interests of their clients. It is therefore
necessary to provide for rules to ensure that such conflicts do not adversely
affect the interests of their clients.

ò new

(41)     Member
States should ensure the respect of the right to the protection of pesonal data
in accordance with Directive 95/46/EC of the European Parliament and of the
Council of 24 October 1995 on the protection of individuals with regard to the
processing of personal data and of the free movement of such data and
Direcetive 2002/58/EC of the European Parliament and of the Council of 12 July
2002 concerning the processing of personal data and the protection of privacy
in the electronic communications sector (Directive on privacy and electronic
communications)[37] which govern the
processing of personal data carried out in application of this Directive.
Processing of personal data by ESMA in the application of this Directive is
subject to Regulation (EU) No 45/2001 of the European Parliament and of the
Council of 18 December 2000 on the protection of individuals with regard to the
processing of personal data by the Community institutions and bodies and on the
free movement of such data[38].

ò new

(42)     Commission
Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the
European Parliament and of the Council as regards organisational requirements
and operating conditions for investment firms and defined terms for the
purposes of that Directive [39] allows Member States to
require, in the context of organisational requirements for investment firms,
the recording of telephone conversations or electronic communications involving
client orders. Recording of telephone conversations or electronic
communications involving client orders is compatible with the Charter of
Fundamental Rights of the European Union and is justified in order to strenghten
investor protection, to improve market surveillance and increase legal
certainty in the interest of investment firms and their clients. The importance
of such records is also mentioned in the technical advice to the European
Commission, released by the Committee of European Securities Regulators on 29
July 2010. For these reasons, it is appropriate to provide in this Directive
for the principles of a general regime concerning the recording of telephone
conversations or electronic communications involving client orders.

ò new

(43)     Member
States should ensure the right to the protection of personal data in accordance
with Directive 95/46/EC of the European Parliament and of the Council of 24
October 1995 on the protection of individuals with regard to the processing of
personal data and of the free movement of such data and Directive 2002/58/EC.
This protection should notably extend to telephone and electronic recording as
required under Article 13.

ò new

(44)     The
use of trading technology has evolved significantly in the past decade and is
now extensively used by market participants. Many market participants now make
use of algorithmic trading where a computer algorithm automatically determines
aspects of an order with minimal or no human intervention. A specific subset of
algorithmic trading is high frequency trading where a trading system analyses
data or signals from the market at high speed and then sends or updates large
numbers of orders within a very short time period in response to that analysis.
High frequency trading is typically done by the traders using their own capital
to trade and rather than being a strategy in itself is usually the use of
sophisticated technology to implement more traditional trading strategies such
as market making or arbitrage.

ò new

(45)     In
line with Council conclusions on strengthening Union financial supervision of
June 2009, and in order to contribute to the establishment of a single rulebook
for Union financial markets, help further develop a level playing field for
Member States and market participants, enhance investor protection and improve
supervision and enforcement, the Union has committed to minimise, where
appropriate, discretions available to Member States across Union financial
services legislation. Besides the introduction in this directive of a common
regime for the recording of telephone conversations or electronic
communications involving client orders, it is appropriate to reduce the
possibility of competent authorities to delegate supervisory tasks in certain
cases, to limit discretions in the requirements applicable to tied agents and
to the reporting from branches.

ò new

(46)     The
use of trading technology has increased the speed, capacity and complexity of
how investors trade. It has also enabled market participants to facilitate
direct access by their clients to markets through the use of their trading
facilities, through direct electronic access or sponsored and direct market
access. Trading technology has provided benefits to the market and market
participants generally such as wider participation in markets, increased
liquidity, narrower spreads, reduced short term volatility and the means to
obtain better execution of orders for clients. Yet, this trading technology
also gives rise to a number of potential risks such as an increased risk of the
overloading of the systems of trading venues due to large volumes of orders,
risks of algorithmic trading generating duplicative or erroneous orders or
otherwise malfunctioning in a way that may create a disorderly market. In
addition there is the risk of algorithmic trading systems overreacting to other
market events which can exacerbate volatility if there is a pre-existing market
problem. Finally, algorithmic trading or high frequency can lend itself to
certain forms of abusive behaviour if misused.

ò new

(47)     These
potential risks from increased use of technology are best mitigated by a
combination of specific risk controls directed at firms who engage in
algorithmic or high frequency trading and other measures directed at operators
of trading venues that are accessed by such firms. It is desirable to ensure
that all high frequency trading firms be authorised when they are a direct member
of a trading venue. This should ensure they are subject to organisational
requirements under the Directive and are properly supervised.

ò new

(48)     Both
firms and trading venues should ensure robust measures are in place to ensure
that automated trading does not create a disorderly market and cannot be used
for abusive purposes. Trading venues should also ensure their trading systems
are resilient and properly tested to deal with increased order flows or market
stresses and that circuit breakers are in place to temporarily halt trading if
there are sudden unexpected price movements.

ò new

(49)     In
addition to measures relating to algorithmic and high frequency trading it is
appropriate to include controls relating to investment firms providing direct
electronic access to markets for clients as electronic trading can be carried
out via a firm providing electronic market access and many similar risks. It is
also appropriate that firms providing direct electronic access ensure that
persons using this service are properly qualified and that risk controls are
imposed on the use of the service. It is appropriate that detailed
organisational requirements regarding these new forms of trading should be
prescribed in more detail in delegated acts. This should ensure that
requirements may be amended where necessary to deal with further innovation and
developments in this area.

ò new

(50)     There
is a multitude of trading venues currently operating in the EU , among which a number
are trading identical instruments. In order to address potential risks to the
interests of investors it is necessary to formalise and further harmonise the
processes on the consequences for trading on other venues if one trading venue
decides to suspend or remove a financial instrument from trading. In the
interest of legal certainty and to adequately address conflicts of interests
when deciding to suspend or to remove instruments from trading, it should be
ensured that if one regulated market or MTF stops trading due to non disclosure
of information about an issuer or financial instrument, the others follow that
decision unless continuing trading may be justified due to exceptional
circumstances. In addition, it is necessary to formalise and improve the
exchange of information and the cooperation of trading venues in cases of
exceptional conditions in relation to a particular instrument that is traded on
various venues.

ò new

(51)     More
investors have become active in the financial markets and are offered a more
complex wide-ranging set of services and instruments and, in view of these
developments, it is necessary to provide for a degree of harmonisation to offer
investors a high level of protection across the Union. When Directive 2004/39/EC
was adopted, the increasing dependence of investors on personal recommendations
required to include the provision of investment advice as an investment service
subject to authorisation and to specific conduct of business obligations. The
continuous relevance of personal recommendations for clients and the increasing
complexity of services and instruments require enhancing the conduct of
business obligations in order to strengthen the protection of investors.

ò new

(52)     In
order to give all relevant information to investors, it is appropriate to
require investment firms providing investment advice to clarify the basis of
the advice they provide, notably the range of products they consider in
providing personal recommendations to clients, whether they provide investment
advice on an independent basis and whether they provide the clients with the
on-going assessment of the suitability of the financial instruments recommended
to them. It is also appropriate to require investment firms to explain their
clients the reasons of the advice provided to them. In order to further define
the regulatory framework for the provision of investment advice, while at the
same time leaving choice to investment firms and clients, it is appropriate to
establish the conditions for the provisions of this service when firms inform
clients that the service is provided on an independent basis. In order to
strengthen the protection of investors and increase clarity to clients as to
the service they receive, it is appropriate to further restrict the possibility
for firms to accept or receive inducements from third parties, and particularly
from issuers or product providers, when providing the service of investment
advice on an independent basis and the service of portfolio management. In such
cases, only limited non-monetary benefits as training on the features of the
products should be allowed subject to the condition that they do not impair the
ability of investment firms to pursue the best interest of their clients, as
further clarified in Directive 2006/73/EC.

ò new

(53)     Investment
firms are allowed to provide investment services that only consist of execution
and/or the reception and transmission of client orders, without the need to
obtain information regarding the knowledge and experience of the client in
order to assess the appropriateness of the service or the instrument for the
client. Since these services entail a relevant reduction of clients'
protections, it is appropriate to improve the conditions for their provision.
In particular, it is appropriate to exclude the possibility to provide these
services in conjunction with the ancillary service consisting of granting
credits or loans to investors to allow them to carry out a transaction in which
the investment firm is involved, since this increases the complexity of the
transaction and makes more difficult the understanding of the risk involved. It
is also appropriate to better define the criteria for the selection of the
financial instruments to which these services should relate in order to exclude
the financial instruments, including collective investment in transferable
securities (UCITS), which embed a derivative or incorporate a structure which
makes it difficult for the client to understand the risk involved.

ò new

(54)     Cross-selling
practices are a common strategy for retail financial service providers
throughout the Union. They can provide benefits to retail clients but can also
represent practices where the interest of the client is not adequately
considered. For instance, certain forms of cross-selling practices, namely
tying practices where two or more financial services are sold together in a
package and at least one of those services is not available separately, can
distort competition and negatively affect clients' mobility and their ability
to make informed choices. An example of tying practices can be the necessary
opening of current accounts when an investment service is provided to a retail
client. While practices of bundling, where two or more financial services
are sold together in a package, but each of the services can also be purchased
separately, may also distort competition and negatively affect customer
mobility and clients' ability to make informed choices, they at least leave
choice to the client and may therefore pose less risk to the compliance of
investment firms with their obligations under this directive. The use of such
practices should be carefully assessed in order to promote competition and
consumer choice.

ê 2004/39/EC
recital 30

(55)(30)           A
service should be considered to be provided at the initiative of a client
unless the client demands it in response to a personalised communication from
or on behalf of the firm to that particular client, which contains an
invitation or is intended to influence the client in respect of a specific
financial instrument or specific transaction. A service can be considered to be
provided at the initiative of the client notwithstanding that the client demands
it on the basis of any communication containing a promotion or offer of
financial instruments made by any means that by its very nature is general and
addressed to the public or a larger group or category of clients or potential
clients.

ê 2004/39/EC
recital 31

ð new

(56)(31)           One
of the objectives of this Directive is to protect investors. Measures to
protect investors should be adapted to the particularities of each category of
investors (retail, professional and counterparties). ð However, in order to enhance the
regulatory framework applicable to the provision of services irrespective of
the categories of clients concerned, it is appropriate to make it clear that
principles to act honestly, fairly and professionally and the obligation to be
fair, clear and not misleading apply to the relationship with any
clients. ï

ê 2004/39/EC
recital 32

(57)(32)           By
way of derogation from the principle of home country authorisation, supervision
and enforcement of obligations in respect of the operation of branches, it is
appropriate for the competent authority of the host Member State to assume
responsibility for enforcing certain obligations specified in this Directive in
relation to business conducted through a branch within the territory where the
branch is located, since that authority is closest to the branch, and is better
placed to detect and intervene in respect of infringements of rules governing
the operations of the branch.

ê 2004/39/EC
recital 33

(58)(33)           It
is necessary to impose an effective ‘best execution’ obligation to ensure
that investment firms execute client orders on terms that are most
favourable to the client. This obligation should apply to the firm which owes contractual
or agency obligations to the client.

ò new

(59)     In order to enhance the
conditions under which investment firms comply with their obligation to execute
orders on terms most favourable to their clients in accordance with this Directive,
it is appropriate to require execution venues to make available to the public
data relating to the quality of execution of transactions on each venue.

ò new

(60)     Information
provided by investment firms to clients in relation to their order execution
policies often are generic and standard and do not allow clients to understand
how an order will be executed and to verify firms' compliance with their
obligation to execute orders on term most favourable to their clients. In order
to enhance investor protection it is appropriate to specify the principles
concerning the information given by investment firms to their clients on the
order execution policies and to require firms to make public, on an annual
basis, for each class of financial instruments, the top five execution venues
where they executed client orders in the preceding year.

ê 2004/39/EC
recital 34

(34)     Fair
competition requires that market participants and investors be able to compare
the prices that trading venues (i.e.
regulated markets, MTFs and intermediaries) are required to publish. To this
end, it is recommended that Member States remove any obstacles which may
prevent the consolidation at European level of the relevant information and its
publication.

ê 2004/39/EC
recital 35 (adapted)

(61)(35)           When
establishing the business relationship with the client the investment firm
might ask the client or potential client to consent at the same time to the
execution policy as well as to the possibility that his orders may be executed
outside a regulated market or an MTF Ö , OTF or
systematic internaliser Õ .

ê 2004/39/EC
recital 36

(62)(36)           Persons
who provide investment services on behalf of more than one investment firm
should not be considered as tied agents but as investment firms when they fall
under the definition provided in this Directive, with the exception of certain
persons who may be exempted.

ê 2004/39/EC
recital 37

(63)(37)           This
Directive should be without prejudice to the right of tied agents to undertake
activities covered by other Directives and related activities in respect of
financial services or products not covered by this Directive, including on
behalf of parts of the same financial group.

ê 2004/39/EC
recital 38

(64)(38)           The
conditions for conducting activities outside the premises of the investment
firm (door-to-door selling) should not be covered by this Directive.

ê 2004/39/EC
recital 39

(65)(39)           Member
States' competent authorities should not register or should withdraw the
registration where the activities actually carried on indicate clearly that a
tied agent has opted for the legal system of one Member State for the
purpose of evading the stricter standards in force in another Member State
within the territory of which it intends to carry on or does carry on the
greater part of its activities.

ê 2004/39/EC
recital 40

(66)(40)           For
the purposes of this Directive eligible counterparties should be considered as
acting as clients.

ê 2004/39/EC
recital 41

(41)     For
the purposes of ensuring that conduct of business rules (including rules on
best execution and handling of client orders) are enforced in respect of those
investors most in need of these protections,
and to reflect well-established market practice throughout the Community, it is
appropriate to clarify that conduct of business rules may be waived in the case
of transactions entered into or brought about between eligible
counterparties.

ò new

(67)     The
financial crisis has shown limits in the ability of non-retail clients to
appreciate the risk of their investments. While it should be confirmed that
conduct of business rules should be enforced in respect of those investors most
in need of protection, it is appropriate to better calibrate the requirements
applicable to different categories of clients. To this extent, it is
appropriate to extend some information and reporting requirements to the relationship
with eligible counterparties. In particular, the relevant requirements should
relate to the safeguarding of client financial instruments and monies as well
as information and reporting requirements concerning more complex financial
instruments and transaction. In order to better define the classification of
municipalities and local public authorities, it is appropriate to clearly
exclude them from the list of eligible counterparties and of clients who are
considered to be professionals while still allowing these clients to ask a
treatment as professional clients on request.

ê 2004/39/EC
recital 42

(68)(42)           In
respect of transactions executed between eligible counterparties, the
obligation to disclose client limit orders should only apply where the counter
party is explicitly sending a limit order to an investment firm for its
execution.

ê 2004/39/EC
recital 43

(69)(43)           Member
States shall protect the right to privacy of natural persons with respect to
the processing of personal data in accordance with Directive 95/46/EC of
the European Parliament and of the Council of 24 October 1995 on
the protection of individuals with regard to the processing of personal data
and of the free movement of such data.[40]

ê 2004/39/EC
recital 44

(44)     With
the two-fold aim of protecting investors and ensuring the smooth operation of
securities markets, it is necessary to ensure that transparency of
transactions is achieved and that the rules laid down for that purpose apply to
investment firms when they operate on the
markets. In order to enable investors or market participants to assess at any
time the terms of a transaction in shares that they are considering and to
verify afterwards the conditions in which it was carried out, common
rules should be established for the publication of details of completed
transactions in shares and for the disclosure of details of current
opportunities to trade in shares. These rules are needed to ensure the
effective integration of Member State equity
markets, to promote the efficiency of the overall price formation process for
equity instruments, and to assist the effective operation of
‘best execution’ obligations. These considerations require a comprehensive
transparency regime applicable to all transactions in shares irrespective of
their execution by an investment firm on a bilateral basis or through regulated
markets or MTFs. The obligations for investment firms under this Directive to
quote a bid and offer price and to execute an order at the quoted price do not relieve investment firms of
the obligation to route an order to another execution venue when such
internalisation could prevent the firm from complying with ‘best execution’
obligations.

ê 2004/39/EC
recital 45

(45)     Member States should be able to apply transaction
reporting obligations of the Directive to financial instruments that are not
admitted to trading on a regulated market.

ê 2004/39/EC
recital 46

(46)     A
Member State may decide to apply the pre- and
post-trade transparency requirements laid down in this Directive to
financial instruments other than shares. In that case those requirements should
apply to all investment firms for which that Member State is the home Member
State for their operations within the territory of that Member State and
those carried out cross-border through the freedom to provide services.
They should also apply to the operations carried out within the territory
of that Member State by the branches established in its territory of investment firms authorised in another Member
State.

ê 2004/39/EC
recital 47 (adapted)

(70)(47)           Investment
firms should all have the same opportunities of joining or having access to
regulated markets throughout the Community Ö Union Õ . Regardless
of the manner in which transactions are at present organised in the Member
States, it is important to abolish the technical and legal restrictions on
access to regulated markets.

ê 2004/39/EC
recital 48 (adapted)

(71)(48)           In
order to facilitate the finalisation of cross-border transactions, it is
appropriate to provide for access to clearing and settlement systems throughout
the Community
Ö Union Õ by investment
firms, irrespective of whether transactions have been concluded through
regulated markets in the Member State concerned. Investment firms which wish to
participate directly in other Member States' settlement systems should comply
with the relevant operational and commercial requirements for membership and
the prudential measures to uphold the smooth and orderly functioning of the
financial markets.

ò new

(72)     The
provision of services by third country firms in the Union is subject to
national regimes and requirements. These regimes are highly differentiated and
the firms authorised in accordance with them do not enjoy the freedom to
provide services and the right of establishment in Member States other than the
one where they are established. It is appropriate to introduce a common
regulatory framework at Union level. The regime should harmonize the existing
fragmented framework, ensure certainty and uniform treatment of third country
firms accessing the Union, ensure that and equivalence assessment has been carried
out by the Commission in relation to the regulatory and supervisory framework
of third countries and should provide for a comparable level of protections to
investors in the EU receiving services by third country firms.

ò new

(73)     The
provision of services to retail clients should always require the establishment
of a branch in the Union. The establishment of the branch shall be subject to
authorisation and supervision in the Union. Proper cooperation arrangements
should be in place between the competent authority concerned and the competent
authority in the third country. Sufficient initial capital should be at free
disposal of the branch. Once authorised the branch should be subject to
supervision in the Member State where the branch is established; the third
country firm should be able to provide services in other Member States through
the authorised and supervised branch, subject to a notification procedure. The
provision of services without branches should be limited to eligible counterparties.
It should be subject to registration by ESMA and to supervision in the third
country. Proper cooperation arrangements should be in place between ESMA and the
competent authorities in the third country.

ò new

(74)     The
provision of this directive regulating the provision of services by third
country firms in the Union should not affect the possibility for persons
established in the Union to receive investment services by a third country firm
at their own exclusive initiative. When a third country firm provides services
at own exclusive initiative of a person established in the Union, the services
should not be deemed as provided in the territory of the Union. In case a third
country firm solicits clients or potential clients in the Union or promotes or
advertises investment services or activities together with ancillary services
in the Union, it should not be deemed as a service provided at the own
exclusive initiative of the client.

ê 2004/39/EC
recital 49 (adapted)

ð new

(75)(49)           The
authorisation to operate a regulated market should extend to all activities
which are directly related to the display, processing, execution, confirmation
and reporting of orders from the point at which such orders are received by the
regulated market to the point at which they are transmitted for subsequent
finalisation, and to activities related to the admission of financial
instruments to trading. This should also include transactions concluded through
the medium of designated market makers appointed by the regulated market which
are undertaken under its systems and in accordance with the rules that govern
those systems. Not all transactions concluded by members or participants of the
regulated market, or MTF ð or OTF ï are to be considered as concluded within the systems of a regulated
market, or
MTF ð or OTF ï . Transactions which members or participants conclude on a
bilateral basis and which do not comply with all the obligations established
for a regulated market, or
an MTF ð or an OTF ï under this Directive should be considered as transactions concluded
outside a regulated market, or
an MTF ð or an OTF ï for the purposes of the definition of systematic internaliser. In
such a case the obligation for investment firms to make public firm quotes
should apply if the conditions established by this Directive are met.

ò new

(76)     The
provision of core market data services which are pivotal for users to be able
to obtain a desired overview of trading activity across Union markets and for
competent authorities to receive accurate and comprehensive information on
relevant transactions should be subject to authorisation and regulation to
ensure the necessary level of quality.

ò new

(77)     The
introduction of approved publication arrangements should improve the quality of
trade transparency information published in the OTC space and contribute significantly
to ensuring that such data is published in a way facilitating its consolidation
with data published by trading venues.

ò new

(78)     The
introduction of a commercial solution for a consolidated tape for equities
should contribute to creating a more integrated European market and make it
easier for market participants to gain access to a consolidated view of trade
transparency information that is available. The envisaged solution is based on
an authorisation of providers working along pre-defined and supervised
parameters which are in competition with each other in order to achieve
technically highly sophisticated and innovative solutions, serving the market
to the greatest extent possible.

ê 2004/39/EC
recital 50

(50)     Systematic
internalisers might decide to give access to their quotes only to retail
clients, only to professional clients, or to both. They should not be allowed
to discriminate within those categories of clients.

ê 2004/39/EC
recital 51

(51)     Article 27 does not oblige systematic
internalisers to publish firm quotes in relation to transactions above standard
market size.

ê 2004/39/EC
recital 52

(52)     Where
an investment firm is a systematic internaliser both in shares and in other financial instruments, the obligation to quote
should only apply in respect of shares without prejudice to Recital 46.

ê 2004/39/EC
recital 53

(53)     It is
not the intention of this Directive to require the application of pre-trade
transparency rules to transactions carried
out on an OTC basis, the characteristics of which include that they are ad-hoc
and irregular and are carried out with wholesale counterparties and are part of
a business relationship which is itself characterised by dealings above
standard market size, and where the deals are carried out outside the systems
usually used by the firm concerned for its business as a systematic
internaliser.

ê 2004/39/EC
recital 54

(54)     The
standard market size for any class of share
should not be significantly disproportionate to any share included in that
class.

ê 2004/39/EC
recital 55 (adapted)

(79)(55)           Revision
of Directive 93/6/EEC Ö 2006/49/EC Õ should fix the
minimum capital requirements with which regulated markets should comply in
order to be authorised, and in so doing should take into account the specific
nature of the risks associated with such markets.

ê 2004/39/EC
recital 56

(80)(56)           Operators
of a regulated market should also be able to operate an MTF in accordance with
the relevant provisions of this Directive.

ê 2004/39/EC
recital 57

(81)(57)           The
provisions of this Directive concerning the admission of instruments to trading
under the rules enforced by the regulated market should be without prejudice to
the application of Directive 2001/34/EC of the European Parliament
and of the Council of 28 May 2001 on the admission of securities to
official stock exchange listing and on information to be published on those
securities[41]. A regulated market
should not be prevented from applying more demanding requirements in respect of
the issuers of securities or instruments which it is considering for admission
to trading than are imposed pursuant to this Directive.

ê 2004/39/EC
recital 58

(82)(58)           Member
States should be able to designate different competent authorities to enforce
the wide-ranging obligations laid down in this Directive. Such authorities
should be of a public nature guaranteeing their independence from economic
actors and avoiding conflicts of interest. In accordance with national law,
Member States should ensure appropriate financing of the competent authority.
The designation of public authorities should not exclude delegation under the
responsibility of the competent authority.

ò new

(83)     The
G20 summit in Pittsburgh on 25 September 2009 agreed to improve the regulation,
functioning and transparency of financial and commodity markets to address
excessive commodity price volatility. The Commission Communications of 28
October 2009 on A Better Functioning Food Supply Chain in Europe, and of 2
February 2011 on Tackling the Challenges in Commodity Markets and Raw Materials
outlined measures that fall to be taken in the context of the review of Directive
2004/39/EC.

ò new

(84)     The
powers made available to competent authorities should be complemented with
explicit powers to demand information from any person regarding the size and
purpose of a position in derivatives contracts related to commodities and to
request the person to take steps to reduce the size of the position in the
derivative contracts.

ò new

(85)     Explicit
powers should be granted to competent authorities to limit the ability of any
person or class of persons from entering into a derivative contract in relation
to a commodity. The application of a limit should be possible both in the case
of individual transactions and positions built up over time. In the latter case
in particular, the competent authority should ensure that these position limits
are non-discriminatory, clearly spelled out, take due account of the
specificity of the market in question, and are necessary to secure the
integrity and orderly functioning of the market.

ò new

(86)     All
venues which offer trading in commodity derivatives should have in place
appropriate limits or suitable alternative arrangements designed to support
liquidity, prevent market abuse, and ensure the orderly pricing and settlement
conditions. ESMA should maintain and publish a list containing summaries of all
such measures in force. These
limits or arrangements should be applied in a consistent manner and take
account of the specific characteristics of the market in question. They should
be clearly spelled out as regards to whom they apply and any exemptions
thereto, as well as to the relevant quantitative thresholds which constitute
the limits or which may trigger other obligations. The Commission should be
empowered to adopt delegated acts, including with a view to avoiding any
divergent effects of the limits or arrangements applicable to comparable
contracts on different venues.

ò new

(87)     Venues
where the most liquid commodity derivatives are traded should publish an
aggregated weekly breakdown of the positions held by different types of market
participants, including the clients of those not trading on their own behalf. A
comprehensive and detailed breakdown both by the type and identity of the
market participant should be made available to the competent authority upon
request.

ò new

(88)     Considering
the communiqué of G20 finance ministers and central bank governors of 15 April
2011 on ensuring that participants on commodity derivatives markets should be
subject to appropriate regulation and supervision, the exemptions from Directive
2004/39/EC.for various participants active in commodity derivative markets
should be modified to ensure that activities by firms, which are not part of a
financial group, involving the hedging of production-related and other risks as
well as the provision of investment services in commodity or exotic derivatives
on an ancillary basis to clients of the main business remain exempt, but that
firms specialising in trading commodities and commodity derivatives are brought
within this Directive.

ò new

(89)     It
is desirable to facilitate access to capital for smaller and medium sized
enterprises and to facilitate the further development of specialist markets
that aim to cater for the needs of smaller and medium sized issuers. These
markets which are usually operated under this Directive as MTFs are commonly
known as SME markets, growth markets or junior markets. The creation within the
MTF category of a new sub category of SME growth market and the registration of
these markets should raise their visibility and profile and aid the development
of common pan-European regulatory standards for those markets.

ò new

(90)     The
requirements applying to this new category of markets need to provide
sufficient flexibility to be able to take into account the current range of
successful market models that exist across Europe. They also need to strike the
correct balance between maintaining high levels of investor protection, which
are essential to fostering investor confidence in issuers on these markets,
while reducing unnecessary administrative burdens for issuers on those markets.
It is proposed that more details about SME market requirements such as those
relating to criteria for admission to trading on such a market would be further
prescribed in delegated acts or technical standards.

ò new

(91)     Given
the importance of not adversely affecting existing successful markets the
option should remain for operators of markets aimed at smaller and medium sized
issuers to choose to continue to operate such a market in accordance with the
requirements under the Directive without seeking registration as an SME growth
market.

ê 2004/39/EC
recital 59

(92)(59)           Any
confidential information received by the contact point of one Member State
through the contact point of another Member State should not be regarded as
purely domestic.

ê 2004/39/EC
recital 60

(93)(60)           It
is necessary to enhance convergence of powers at the disposal of competent
authorities so as to pave the way towards an equivalent intensity of
enforcement across the integrated financial market. A common minimum set of
powers coupled with adequate resources should guarantee supervisory
effectiveness.

ò new

(94)     In
view of the significant impact and market share acquired by various MTFs, it is
appropriate to ensure that adequate cooperation arrangements are established
between the competent authority of the MTF and that of the jurisdiction in
which the MTF is providing services. In order to anticipate any similar
developments, this should be extended to OTFs.

ò new

(95)     In
order to ensure compliance by investment firms and regulated markets, those who
effectively control their business and the members of the investment firms and
regulated markets' management body with the obligations deriving from this
Directive and from Regulation [inserted by OP] and to ensure that they are
subject to similar treatment across the Union, Member States should be required
to provide for administrative sanctions and measures which are effective,
proportionate and dissuasive. Therefore, administrative sanctions and measures
set out by Member States should satisfy certain essential requirements in
relation to addressees, criteria to be taken into account when applying a
sanction or measure, publication , key sanctioning powers and levels of
administrative pecuniary sanctions.

ò new

(96)     In
particular, competent authorities should be empowered to impose pecuniary
sanctions which are sufficiently high to offset the benefits that can be
expected and to be dissuasive even for larger institutions and their managers.

ò new

(97)     In
order to ensure a consistent application of sanctions across Member States,
when determining the type of administrative sanctions or measures and the level
of administrative pecuniary sanctions, Member States should be required to
ensure that when determining the type of administrative sanctions or measures
and the level of administrative pecuniary sanctions, the competent authorities
take into account all relevant circumstances.

ò new

(98)     In
order to ensure sanctions have a dissuasive effect on the public at large,
sanctions should normally be published, except in certain well-defined
circumstances.

ò new

(99)     In
order to detect potential breaches, competent authorities should have the
necessary investigatory powers, and should establish effective mechanisms to
encourage reporting of potential or actual breaches. These mechanisms should be
without prejudice to adequate safeguards for accused persons. Appropriate
procedures should be established to ensure the right of the reported person of
defence and to be heard before the adoption of a final decision concerning him
as well as the right to seek remedy before a tribunal against a decision
concerning him.

ò new

(100)   This
Directive should refer to both administrative sanctions and measures in order
to cover all actions applied after a violation is committed, and which are
intended to prevent further infringements, irrespective of their qualification
as a sanction or a measure under national law.

ò new

(101)   This
Directive should be without prejudice to any provisions in the law of Member
States relating to criminal sanctions.

ê 2004/39/EC
(adapted)

ð new

(102)(61)         With
a view to protecting clients and without prejudice to the right of customers to
bring their action before the courts, it is appropriate that Member States ensure thatencourage
public or private bodies Ö are Õ established
with a view to settling disputes out-of-court, to cooperate in resolving cross-border
disputes, taking into account Commission Recommendation 98/257/EC of
30 March 1998 on the principles applicable to the bodies responsible
for out-of-court settlement of consumer disputes[42]
ð and Commission Recommendation
2001/310/EC on the principles for out-of-court bodies involved in the
consensual resolution of consumer disputes ï. When implementing provisions on complaints and redress procedures
for out-of-court settlements, Member States should be encouraged to use existing
cross-border cooperation mechanisms, notably the Financial Services
Complaints Network (FIN-Net).

ê 2004/39/EC
recital 62

ð new

(103)(62)         Any
exchange or transmission of information between competent authorities, other authorities,
bodies or persons should be in accordance with the rules on transfer of
personal data to third countries as laid down in Directive 95/46/EC ð of the European Parliament and of
the Council of 24 October 1995 on the protection of individuals with regard to
the processing of personal data and on the free movement of such data[43]. Any exchange or transmission of personal
data by ESMA with third countries should be in accordance with the rules on the
transfer of personal data as laid down in Regulation (EC) No 45/2001ï.

ê 2004/39/EC
recital 63

(104)(63)         It
is necessary to reinforce provisions on exchange of information between
national competent authorities and to strengthen the duties of assistance and
cooperation which they owe to each other. Due to increasing cross-border
activity, competent authorities should provide each other with the relevant
information for the exercise of their functions, so as to ensure the effective
enforcement of this Directive, including in situations where infringements or
suspected infringements may be of concern to authorities in two or more Member
States. In the exchange of information, strict professional secrecy is needed
to ensure the smooth transmission of that information and the protection of
particular rights.

ê 2004/39/EC
recital 64

(64)     At its meeting on 17 July 2000, the
Council set up the Committee of Wise Men on the Regulation of European
Securities Markets. In its final report, the Committee of Wise Men
proposed the introduction of new legislative techniques based on a four-level
approach, namely framework principles, implementing measures, cooperation and
enforcement. Level 1, the Directive, should confine itself to broad
general ‘framework’ principles while
Level 2 should contain technical implementing measures to be adopted by
the Commission with the assistance of a committee.

ê 2004/39/EC
recital 65

(65)     The Resolution adopted by the Stockholm European
Council of 23 March 2001 endorsed the final report of the
Committee of Wise Men and the proposed four-level approach to make the
regulatory process for Community securities legislation more efficient and
transparent.

ê 2004/39/EC
recital 66

(66)     According to the Stockholm European Council,
Level 2 implementing measures should be used more frequently, to ensure
that technical provisions can be kept up to date with market and supervisory
developments, and deadlines should be set for all stages of Level 2 work.

ê 2004/39/EC
recital 67

(67)     The Resolution of the European Parliament of
5 February 2002 on the implementation of financial services
legislation also endorsed the Committee of Wise Men's report, on the basis
of the solemn declaration made before Parliament the same day by the
Commission and the letter of 2 October 2001 addressed by the Internal
Market Commissioner to the chairman of Parliament's Committee on Economic and
Monetary Affairs with regard to the safeguards for the European Parliament's
role in this process.

ê 2004/39/EC
recital 68(adapted)

(68)     The measures necessary for the implementation of
this Directive should be adopted in accordance with Council
Decision 1999/468/EC of 28 June 1999 laying down the procedures
for the exercise of implementing powers conferred on the Commission[44].

ê 2006/31/EC
Art. 1.1

(105)(69)         The
European Parliament should be given a period of three months from the first
transmission of draft amendments and implementing measures to allow it to examine
them and to give its opinion. However, in urgent and duly justified cases, it
should be possible to shorten that period. If, within that period, a resolution
is adopted by the European Parliament, the Commission should re-examine the
draft amendments or measures.

ê 2004/39/EC
recital 70

(70)     With a
view to taking into account further developments in the financial markets
the Commission should submit reports to the European Parliament and
the Council on the application of the provisions concerning professional indemnity insurance, the scope of the transparency
rules and the possible authorisation of specialised dealers in commodity
derivatives as investment firms.

ò new

(106)   In
order to attain the objectives set out in this Directive, the power to adopt
acts in accordance with Article 290 of the Treaty should be delegated to the
Commission in respect of details concerning exemptions, the clarification of
definitions, the criteria for the assessment of proposed acquisitions of an
investment firm, the organisational requirements for investment firms, the
management of conflicts of interest, conduct of business obligations in the
provision of investment services, the execution of orders on terms most
favourable to the client, the handling of client orders, the transactions with
eligible counterparties, the SME growth markets, the conditions for the
assessment of initial capital of third country firms, measures concerning
systems resilience, circuit breakers and electronic trading, the admission of
financial instruments to trading, the suspension and removal of financial
instrtuments from trading, the thresholds for position reporting held by
categories of traders, the cooperation between competent authorities. It is of
particular importance that the Commission carries out appropriate consultations
during its preparatory work, including at expert level. The Commission, when
preparing and drawing up delegated acts, should ensure a simultaneous, timely
and appropriate transmission of relevant documents to the European Parliament
and to the Council.

ò new

(107)   In
order to ensure uniform conditions for the implementation of this Directive,
implementing powers should be conferred on the Commission. These powers relate
to the adoption of the equivalence decision concerning third country legal and
supervisory framework for the provision of services by third country firms and
the sending of positions reports by categories of traders to ESMA and they
should be exercised in accordance with Regulation (EU) No 182/2011 of the
European Parliament and of the Council of 16 February 2011 laying down the
rules and general principles concerning mechanisms for control by Member States
of the Commission's exercise of implementing powers[45].

ò new

(108)   Technical
standards in financial services should ensure consistent harmonisation and
adequate protection of depositors, investors and consumers across the Union. As
a body with highly specialised expertise, it would be efficient and appropriate
to entrust ESMA, with the elaboration of draft regulatory and implementing
technical standards which do not involve policy choices, for submission to the
Commission.

ò new

(109)   The
Commission should adopt the draft regulatory technical standards developed by
ESMA in Article 7 regarding procedures for granting and refusing requests for
authorisation of investment firms, Articles 9 and 48 regarding requirements for
management bodies, Article 12 regarding acquisition of qualifying holding,
Article 27 regarding obligation to execute orders on terms most favourable to
clients, Articles 34 and 54 regarding cooperation and exchange of information,
Article 36 regarding freedom to provide investment services and activities,
Article 37 regarding establishment of a branch, Article 44 regarding provision
of services by third country firms, Article 63 regarding procedures for
granting and refusing requests for authorisation of data reporting services
providers, Articles 66 and 67 regarding organisational requirements for APAs
and CTPs and Article 84 regarding cooperation among competent authorities. The
Commission should adopt these draft regulatory technical standards by means of
delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10
to 14 of Regulation (EU) No 1093/2010.

ò new

(110)   The
Commission should also be empowered to adopt implementing technical standards
by means of implementing acts pursuant to Article 291 TFEU and in accordance
with Article 15 of Regulation (EU) No 1095/2010. ESMA should be entrusted with
drafting implementing technical standards for submission to the Commission with
regard to Article 7 regarding procedures for granting and refusing requests for
authorisation of investment firms, Article 12 regarding acquisition of
qualifying holding, Article 18 regarding trading process on finalisation of
transactions in MTFs and OTFs, Articles 32, 33 and 53 regarding suspension and
removal of instruments from trading, Article 36 regarding freedom to provide
investment services and activities, Article 37 regarding establishment of a
branch, Article 44 regarding provision of services by third country firms,
Article 60 regarding position reporting by categories of traders, Article 78
regarding submission of information to ESMA, Article 83 regarding obligation to
cooperate, Article 84 regarding cooperation among competent authorities,
Article 85 regarding exchange of information and Article 88 regarding
consultation prior to authorisation.

ò new

(111)   The
Commission should submit a report to the European Parliament and the Council
assessing the functioning of organised trading facilities, the functioning of
the regime for SME growth markets, the impact of requirements regarding automated
and high-frequency trading, the experience with the mechanism for banning
certain products or practices and the impact of the measures regarding
commodity derivatives markets.

ê 2004/39/EC
(adapted)

(112)(71)         The
objective of creating an integrated financial market, in which investors are
effectively protected and the efficiency and integrity of the overall market
are safeguarded, requires the establishment of common regulatory requirements
relating to investment firms wherever they are authorised in the Community
Ö Union Õ and governing
the functioning of regulated markets and other trading systems so as to prevent
opacity or disruption on one market from undermining the efficient operation of
the European financial system as a whole. Since this objective may be better
achieved at Community
Ö Union Õ level, the Community
Ö Union Õ may adopt
measures in accordance with the principle of subsidiarity as set out in Article
5 of the Treaty. In accordance with the principle of proportionality, as
set out in that Article, this Directive does not go beyond what is necessary in
order to achieve this objective,

ò new

(113)   The
establishment of a consolidated tape for non-equity instruments is deemed to be
more difficult to implement than the consolidated tape for equity instruments
and potential providers should be able to to gain experience with the latter
before constructing it. In order to facilitate the proper establishment of the
consolidated tape for non-equity financial instruments, it is therefore
appropriate to provide for an extended date of application of the national
measures transposing the relevant provision.

ò new

(114)   This
Directive respects the fundamental rights and observes the principles
recognised in the Charter of Fundamental Rights of the European Union, notably the right to the protection of
personal data, the freedom to conduct a business, the right to consumer protection,
the right to an effective remedy and to a fair trial, the right not to be tried
or punished twice for the same offence and has to be
implemented in accordance with those rights and principles.

ê 2004/39/EC
(adapted)

HAVE ADOPTED THIS DIRECTIVE:

TITLE I

DEFINITIONS AND SCOPE

Article 1

Scope

1. This Directive shall apply to investment
firms,and
regulated markets Ö, data
reporting service providers and third country firms providing investment
services or activities in the Union Õ .

ò new

2. This Directive
establishes requirements in relation to the following:

(a) authorisation
and operating conditions for investment firms;

(b) provision of
investment services or activities by third country firms with the establishment
of a branch;

(c) authorisation
and operation of regulated markets;

(d) authorisation
and operation of data reporting service providers; and

(e) supervision,
cooperation and enforcement by competent authorities.

ê 2004/39/EC
(adapted)

ð new

32.The following
provisions shall also apply to credit institutions authorised under
Directive 2000/12/EC Ö 2006/48/EC Õ , when
providing one or more investment services and/or performing investment
activities ð and when selling or advising clients in relation to
deposits other than those with a rate of return which is determined in relation
to an interest rate ï:

–
Articles 2(2), ð 9(6), ï 1411,
16, 1713
and 1814,

–
Chapter II of Title II excluding Article
23(2) second subparagraph Ö of
Article 29(2) Õ ,

–
Chapter III of Title II excluding Articles 3631(2) to
31 Ö , (3) and Õ (4) and 3732(2) to
32 Ö, (3),
(4), (5), Õ (6), 32(98) and 32(109),

–
Articles 6948
to 8053,
Ö and
Articles Õ 8457, 8961 and 9062,
and

–
Article 71(1).

Article 2

Exemptions

1. This Directive shall not apply to:

(a) insurance undertakings as
defined in Article 1 of Directive 73/239/EEC or
assurance undertakings as defined in Article 1 of
Directive 2002/83/EC or undertakings carrying on the
reinsurance and retrocession activities referred to in Directive 64/225/EEC
Ö 2009/138/EC Õ ;

(b) persons which provide
investment services exclusively for their parent undertakings, for their
subsidiaries or for other subsidiaries of their parent undertakings;

(c) persons providing an
investment service where that service is provided in an incidental manner
in the course of a professional activity and that activity is regulated by
legal or regulatory provisions or a code of ethics governing the profession
which do not exclude the provision of that service;

(d) persons who do not provide
any investment services or activities other than dealing on own account
unless they:

(i)       are market makers

ð(ii)  are a member of or a participant in
a regulated market or MTF; ï or

(iii)     deal on own account ð by executing client orders ï outside
a regulated market or an MTF on an organised, frequent and systematic basis by
providing a system accessible to third parties in order to engage in dealings
with them;

ð This exemption does not apply to persons exempt under Article 2(1)(i) who deal on own account in financial
instruments as members or participants of a regulated market or MTF, including
as market makers in relation to commodity derivatives, emission allowances, or
derivatives thereof; ï

(e) persons which provide
investment services consisting exclusively in the administration of
employee-participation schemes;

(f) persons which provide
investment services which only involve both administration of
employee-participation schemes and the provision of investment services
exclusively for their parent undertakings, for their subsidiaries or for other
subsidiaries of their parent undertakings;

(g) the members of the European
System of Central Banks and other national bodies performing similar functions ð in the Union, ï and
other public bodies charged with or intervening in the management of the public
debt ð in the Union and international bodies of which one or
more Member States are members ï;

(h) collective investment
undertakings and pension funds whether coordinated at Community Ö Union Õ level or not
and the depositaries and managers of such undertakings;

(i) persons ð who: ï

ð - deal ï dealing on own account in
financial instruments, ð excluding persons who deal on own
account by executing client orders, ï or

ð - provide ï providing investment
services ð , other than dealing on own account,
exclusively for their parent undertakings, for their subsidiaries or for other
subsidiaries of their parent undertakings, or ï

ð - provide investment services, other
than dealing on own account, ï in commodity derivatives or derivative contracts included in Annex
I, Section C 10 ð or emission allowances or
derivatives thereof ï to the clients of their main business,

provided ð that in all cases ï this is an ancillary activity to their main business, when
considered on a group basis, and that main business is not the provision of
investment services within the meaning of this Directive or
banking services under Directive 2000/12/EC Ö 2006/48/EC Õ ;

(j) persons providing investment
advice in the course of providing another professional activity not covered by
this Directive provided that the provision of such advice is not specifically
remunerated;

(k) persons whose
main business consists of dealing on own account in commodities and/or
commodity derivatives. This exception shall not apply where the persons that deal
on own account in commodities and/or commodity derivatives are part of a group
the main business of which is the provision of other investment services within
the meaning of this Directive or banking services under Directive 2000/12/EC;

(k)(l)
firms which provide investment services and/or perform investment activities
consisting exclusively in dealing on own account on markets in financial
futures or options or other derivatives and on cash markets for the sole
purpose of hedging positions on derivatives markets or which deal for the
accounts of other members of those markets or make prices for them and which
are guaranteed by clearing members of the same markets, where responsibility
for ensuring the performance of contracts entered into by such firms is assumed
by clearing members of the same markets;

(l)(m)
associations set up by Danish and Finnish pension funds with the sole aim of
managing the assets of pension funds that are members of those associations;

(m)(n)‘agenti di cambio’
whose activities and functions are governed by Article 201 of Italian
Legislative Decree No 58 of 24 February 1998.

ð (n) transmission system operators as
defined in Article 2(4) of Directive 2009/72/EC or Article 2(4) of Directive
2009/73/EC when carrying out their tasks under those Directives or Regulation
(EC) 714/2009 or Regulation (EC) 715/2009 or network codes or guidelines
adopted pursuant those Regulations. ï

2. The rights conferred by this Directive
shall not extend to the provision of services as counterparty in transactions
carried out by public bodies dealing with public debt or by members of the
European System of Central Banks performing their tasks as provided for by the
Treaty and the Statute of the European System of Central Banks and of the
European Central Bank or performing equivalent functions under national
provisions.

3. ð The Commission shall adopt delegated
acts in accordance with Article 94 concerning measures ï In
order to take account of developments on financial markets, and to ensure
the uniform application of this Directive, the Commission
may
,
in respect of exemptions (c) Ö and Õ (i), toand (k) define
the criteria for determining Ö clarifying Õ when an
activity is to be considered as ancillary to the main business on a group level
as well as for determining when an activity is provided in an incidental
manner.

ò new

The criteria for
determining whether an activity is ancillary to the main business shall take
into account at least the following elements:

- the extent to
which the activity is objectively measurable as reducing risks directly related
to the commercial activity or treasury financing activity,

- the capital
employed for carrying out the activity.

ê 2004/39/EC
(adapted)

ð new

Article 3

Optional exemptions

1. Member States may choose not to apply
this Directive to any persons for which they are the home Member State that:

–
are not allowed to hold clients' funds or
securities and which for that reason are not allowed at any time to place
themselves in debit with their clients, and

–
are not allowed to provide any investment
service except the ð provision of investment advice, with
or without ï the reception and transmission of orders in transferable securities
and units in collective investment undertakings and the provision of investment advice in relation
to such financial instruments, and

–
in the course of providing that service, are
allowed to transmit orders only to:

(i) investment firms authorised in
accordance with this Directive;

(ii) credit institutions authorised
in accordance with Directive 2000/12/EC Ö 2006/48/EC Õ ;

(iii) branches of investment firms or
of credit institutions which are authorised in a third country and which
are subject to and comply with prudential rules considered by the competent
authorities to be at least as stringent as those laid down in this Directive,
in Directive 2000/12/EC Ö 2006/48/EC Õ or in
Directive 93/6/EEC Ö 2006/49/EC Õ ;

(iv) collective investment
undertakings authorised under the law of a Member State to market units to the
public and to the managers of such undertakings;

(v) investment companies with fixed
capital, as defined in Article 15(4) of Second Council
Directive 77/91/EEC of 13 December 1976 on coordination of
safeguards which, for the protection of the interests of members and others,
are required by Member States of companies within the meaning of the second
paragraph of Article 58 of the Treaty, in respect of the formation of
public limited liability companies and the maintenance and alteration of their
capital, with a view to making such safeguards equivalent[46],
the securities of which are listed or dealt in on a regulated market in a
Member State;

provided that the activities of those persons
are ð authorised and ï regulated at national level.ð National regimes should submit those
persons to requirements which are at least analogous to the following
requirements under the present directive: ï

ð (i) conditions and procedures for
authorisation and on-going supervision as established in Article 5 (1) and (3),
Articles 7, 8, 9, 10, 21 and 22; ï

ð (ii) conduct of business obligations
as established in Article 24 (1), (2), (3), (5), Article 25(1), (4) and (5) and
the respective implementing measures in Directive 2006/73/EC. ï

ð Member States shall require persons
excluded from the scope of this Directive under paragraph 1 to be covered under
an investor-compensation scheme recognized in accordance with Directive 97/9/EC
or under a system ensuring equivalent protection to their clients. ï

ê 2004/39/EC

2. Persons excluded from the scope of this
Directive according to paragraph 1 cannot benefit from the freedom to provide
services and/or activities or to establish branches as provided for in
Articles 36 and 3731
and 32 respectively.

ò new

3. Member States
shall communicate to the European Commission and to ESMA whether they exercise
the option under this Article and shall ensure that each authorisation granted
in accordance with paragraph 1 mentions that it is granted according to this
Article.

4. Member States
shall communicate to ESMA the provisions of national law analogous to the
requirements of the present directive listed in paragraph 1.

ê 2004/39/EC
(adapted)

è1 2008/10/EC Art. 1.2

ð new

Article 4

Definitions

ð 1. For the purposes of this
Directive, the definitions provided in Article 2 of Regulation (EU) No .../... [MiFIR] shall apply to this Directive. ï

21. For the purposes of this Directive,
Thethe
following definitions shall ð also ï apply:

1)‘Investment
firm’ means any legal person
whose regular occupation or business is the provision of one or more
investment services to third parties and/or the performance of one or more
investment activities on a professional basis;

Member States may
include in the definition of investment firms undertakings which are not legal
persons, provided that:

(a)
their legal status ensures a level of protection for third parties' interests
equivalent to that afforded by legal persons, and

(b)
they are subject to equivalent prudential supervision appropriate to their
legal form.

However,
where a natural person provides services involving the holding of
third parties' funds or transferable securities, he may be considered as
an investment firm for the purposes of this Directive only if, without
prejudice to the other requirements imposed
in this Directive and in Directive 93/6/EEC, he complies with the
following conditions:

(a)
the ownership rights of third parties in instruments and funds must be
safeguarded, especially in the event of the insolvency of the firm or of its
proprietors, seizure, set-off or any other action by creditors of the firm
or of its proprietors;

(b)
the firm must be subject to rules designed to monitor the firm's solvency and
that of its proprietors;

(c)
the firm's annual accounts must be audited by one or more persons empowered,
under national law, to audit accounts;

(d)
where the firm has only one proprietor, he must make provision for the
protection of investors in the event of the firm's cessation of business
following his death, his incapacity or any other such event;

12)‘Investment
services and activities’ means any of the services and activities listed in
Section A of Annex I relating to any of the instruments listed in
Section C of Annex I;

The Commission shall è1 --- ç ð adopt by means of delegated acts in
accordance with Article 94 measures specifying ï :

–
the derivative contracts mentioned in Section C
7 of Annex I that have the characteristics of other derivative financial
instruments, having regard to whether, inter alia, they are cleared and settled
through recognised clearing houses or are subject to regular margin calls;

–
the derivative contracts mentioned in Section C
10 of Annex I that have the characteristics of other derivative financial
instruments, having regard to whether, inter alia, they are traded on a
regulated market or an MTF, are cleared and settled through recognised clearing
houses or are subject to regular margin calls;

23)‘Ancillary
service’ means any of the services listed in Section B of Annex I;

34)‘Investment
advice’ means the provision of personal recommendations to a client, either
upon its request or at the initiative of the investment firm, in respect of one
or more transactions relating to financial instruments;

45)‘Execution of
orders on behalf of clients’ means acting to conclude agreements to buy or sell
one or more financial instruments on behalf of clients ð . Execution of orders includes the
conclusion of agreements to sell financial instruments issued by a credit
institution or an investment firm at the moment of their issuance ï;

56)‘Dealing
on own account’ means trading against proprietary capital resulting in the
conclusion of transactions in one or more financial instruments;

7)‘Systematic
internaliser’ means an investment firm
which, on an organised, frequent and systematic basis, deals on own account by
executing client orders outside a regulated market or an MTF;

68)‘Market
maker’ means a person who holds himself out on the financial markets on a
continuous basis as being willing to deal on own account by buying and selling
financial instruments against his proprietary capital at prices defined by him;

79)‘Portfolio
management’ means managing portfolios in accordance with mandates given by
clients on a discretionary client-by-client basis where such portfolios include
one or more financial instruments;

810)‘Client’
means any natural or legal person to whom an investment firm provides
investment and/or
ancillary services;

911)‘Professional
client’ means a client meeting the criteria laid down in Annex II;

102)‘Retail
client’ means a client who is not a professional client;

13)‘Market
operator’ means a person or persons
who manages and/or operates the business of a regulated market. The market
operator may be the regulated market itself;

14)‘Regulated
market’ means a multilateral
system operated and/or managed by a market operator, which brings together or
facilitates the bringing together of multiple third-party buying and selling
interests in financial instruments – in the system and in accordance with its
non-discretionary rules – in a way that results in a contract, in respect of
the financial instruments admitted to trading under its rules and/or systems,
and which is authorised and functions
regularly and in accordance with the provisions of Title III;

15)‘Multilateral
trading facility (MTF)’ means a multilateral system, operated by an investment
firm or a market operator, which brings together multiple third-party buying
and selling interests in financial instruments – in the system and
in accordance with non-discretionary rules – in a way that results in a
contract in accordance with the provisions of Title II;

ò new

11)     "SME growth market" means a MTF
that is registered as an SME growth market in accordance with Article 35;

12)     "Small and medium-sized enterprise"
for the purposes of this Directive, means a company that had an average market
capitalisation of less than EUR 100 000 000 on the basis of end-year
quotes for the previous three calendar years;

ê 2004/39/EC
(adapted)

ð new

1316)‘Limit
order’ means an order to buy or sell a financial instrument at its specified
price limit or better and for a specified size;

1417)‘Financial
instrument’ means those instruments specified in Section C of
Annex I;

2118)‘Transferable securities’ means
those classes of securities which are negotiable
on the capital market, with the exception of instruments of payment, such
as:

(a) shares
in companies and other securities equivalent to shares in companies,
partnerships or other entities, and depositary receipts in respect of shares;

(b)
bonds or other forms of securitised debt, including depositary receipts
in respect of such securities;

(c)
any other securities giving the right to acquire or sell any such transferable
securities or giving rise to a cash settlement determined by reference to
transferable securities, currencies, interest rates or yields, commodities or
other indices or measures;

1519)‘Money-market
instruments’ means those classes of instruments which are normally dealt in on
the money market, such as treasury bills, certificates of deposit and
commercial papers and excluding instruments of payment;

1620)‘Home
Member State’ means:

(a)     in the case of investment firms:

(i)      if the investment firm is a natural
person, the Member State in which its head office is situated;

(ii)      if the investment firm is a legal
person, the Member State in which its registered office is situated;

(iii)     if the investment firm has, under
its national law, no registered office, the Member State in which its head
office is situated;

(b)     in the case of a regulated market, the
Member State in which the regulated market is registered or, if under the
law of that Member State it has no registered office, the Member State in which
the head office of the regulated market is situated;

1721)‘Host
Member State’ means the Member State, other than the home Member State, in
which an investment firm has a branch or performs services and/or activities or
the Member State in which a regulated market provides appropriate arrangements
so as to facilitate access to trading on its system by remote members or
participants established in that same Member State;

1822)‘Competent
authority’ means the authority, designated by each Member State
in accordance with Article 48, unless otherwise specified in this
Directive;

1923)‘Credit
institutions’ means credit institutions as defined under Directive Ö 2006/48/EC Õ 2000/12/EC;

2024)‘UCITS
management company’ means a management company as defined in Council
Directive 85/611/EEC Ö 2009/65/EC
of the European Parliament and of the Council of 13 July 2009 Õ of
20 December 1985, on the coordination of
laws, regulations and administrative provisions relating to undertakings
for collective investment in transferable securities (UCITS) Ö [47] Õ ;

2125)‘Tied
agent’ means a natural or legal person who, under the full and unconditional
responsibility of only one investment firm on whose behalf it acts, promotes
investment and/or ancillary services to clients or prospective clients,
receives and transmits instructions or orders from the client in respect of investment
services or financial instruments, places financial instruments and/or
provides advice to clients or prospective clients in respect of those financial
instruments or services;

2226)‘Branch’
means a place of business other than the head office which is a part of an
investment firm, which has no legal personality and which provides
investment services and/or activities and which may also perform
ancillary services for which the investment firm has been authorised; all
the places of business set up in the same Member State by an investment firm
with headquarters in another Member State shall be regarded as a single branch;

ê 2007/44/EC
Art. 3.1

2327)‘Qualifying
holding’ means any direct or indirect holding in an investment firm which
represents 10 % or more of the capital or of the voting rights, as set out
in Articles 9 and 10 of Directive 2004/109/EC, taking into account the
conditions regarding aggregation thereof laid down in Article 12(4) and
(5) of that Directive, or which makes it possible to exercise a significant
influence over the management of the investment firm in which that holding
subsists;

ê 2004/39/EC
(adapted)

2428)‘Parent
undertaking’ means a parent undertaking as defined in Articles 1
and 2 of Seventh Council Directive 83/349/EEC of
13 June 1983 on consolidated accounts[48];

2529)‘Subsidiary’
means a subsidiary undertaking as defined in Articles 1 and 2 of
Directive 83/349/EEC, including any subsidiary of a subsidiary undertaking
of an ultimate parent undertaking;

30)‘Control’ means
control as defined in Article 1 of Directive 83/349/EEC;

2631)‘Close
links’ means a situation in which two or more natural or legal persons are
linked by:

(a)
'participation' which
means the ownership, direct or by way of control, of 20% or more of the
voting rights or capital of an undertaking,;

(b)
'control' which means
the relationship between a parent undertaking and a subsidiary, in all the
cases referred to in Article 1(1) and (2) of
Directive 83/349/EEC, or a similar relationship between any natural or
legal person and an undertaking, any subsidiary undertaking of a
subsidiary undertaking also being considered a subsidiary of the parent
undertaking which is at the head of those undertakings,;

(c)
A a situation in which two or more natural or
legal persons Ö they Õ are
permanently linked to one and the same person by a control relationship shall also be regarded as
constituting a close link between such persons;.

ò new

27)    "Management
body" means the governing body of a firm, comprising the supervisory and
the managerial functions, which has the ultimate decision-making authority and
is empowered to set the firm's strategy, objectives and overall direction.
Management body shall include persons who effectively direct the business of
the firm;

28)    "Management
body in its supervisory function" means the management body acting in its
supervisory function of overseeing and monitoring management decision-making;

29)    "Senior management"
means those individuals who exercise executive functions with a firm and who
are responsible and accountable for the day-to-day management of the firm,
including the implementation of the policies concerning the distribution of
services and products to clients by the firm and its personnel;

30)    "Algorithmic
trading" means trading in financial instruments where a computer algorithm
automatically determines individual parameters of orders such as whether to
initiate the order, the timing, price or quantity of the order or how to manage
the order after its submission, with limited or no human intervention. This
definition does not include any system that is only used for the purpose of
routing orders to one or more trading venues or for the confirmation of orders;

31)    "Direct electronic
access" in relation to a trading venue, means an arrangement where a
member or participant of a trading venue permits a person to use its trading
code so the person can electronically transmit orders relating to a financial
instrument directly to the trading venue. This definition includes such an
arrangement whether or not it also involves the use by the person of the
infrastructure of the member or participant, or any connecting system provided
by the member or participant, to transmit the orders;

32)    "Market
Abuse Regulation" means Regulation (EC) No .../...
of the European Parliament and of the Council on insider dealing and market
manipulation (market abuse);

33)    "Cross-selling practice" means
the offering of an investment service together with another service or product
as part of a package or as a condition for the same agreement or package.

ê 2004/39/EC
(adapted)

è1 2008/10/EC Art. 1.2(b)

ð new

32. ð The Commission shall be empowered to
adopt delegated acts in accordance with Article 94 concerning measures to ï In
order to take account of developments on financial markets, and to ensure the
uniform application of this Directive, the Commissionè1 --- ç may clarify ð specify some technical elements of ï the definitions laid down in paragraph 1 of this Article Ö, to
adjust them to market developments Õ .

ê 2008/10/EC
Art. 1.2(b)

The measures
referred to in this Article, designed to amend non-essential elements of this
Directive by supplementing it, shall be adopted in accordance with the
regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC

ð new

TITLE II

AUTHORISATION AND OPERATING CONDITIONS FOR INVESTMENT
FIRMS

CHAPTER I

CONDITIONS AND PROCEDURES FOR AUTHORISATION

Article 5

Requirement for authorisation

1. Each Member State shall require that the
performance of investment services or activities as a regular occupation or
business on a professional basis be subject to prior authorisation in
accordance with the provisions of this Chapter. Such authorisation shall be
granted by the home Member State competent authority designated in accordance
with Article 6948.

2. By way of derogation from paragraph 1,
Member States shall allow any market operator to operate an MTF ð or an OTF ï, subject to the prior verification of their compliance with the
provisions of this Chapter, excluding
Articles 11
and
15.

ê 2010/78/EU
Art. 6.1 (adapted)

3. Member States shall register all
investment firms. The register shall be publicly accessible and shall contain
information on the services or activities for which the investment firm is
authorised. It shall be updated on a regular basis. Every authorisation shall
be notified to the European Supervisory Authority (European
Securities and Markets Authority) (hereinafter ‘ESMA’),
established by Regulation (EU) No 1095/2010 of the European Parliament and
of the Council[49].

ESMA shall establish a list of all
investment firms in the Union. The list shall contain information on the
services or activities for which the Ö each Õ investment firm
is authorised and it shall be updated on a regular basis. ESMA shall publish
and keep up-to-date that list on its website.

Where a competent authority has withdrawn
an authorisation in accordance with Article 8(b) to (d), that
withdrawal shall be published on the list for a period of 5 years.

ê 2004/39/EC
(adapted)

4. Each Member State shall require that:

–
any investment firm which is a legal person have
its head office in the same Member State as its registered office,

–
any investment firm which is not a legal person
or any investment firm which is a legal person but under its national law
has no registered office have its head office in the Member State in which it
actually carries on its business.

5. In the case of
investment firms which provide only investment advice or the service of
reception and transmission of orders under the conditions established in
Article 3, Member States may allow the competent authority to
delegate administrative, preparatory or ancillary tasks related to the granting of an authorisation, in accordance with the
conditions laid down in Article 48(2).

Article 6

Scope of authorisation

1. The home Member State shall ensure that
the authorisation specifies the investment services or activities which the
investment firm is authorised to provide. The authorisation may cover one or
more of the ancillary services set out in Section B of Annex I.
Authorisation shall in no case be granted solely for the provision of ancillary
services.

2. An investment firm seeking authorisation
to extend its business to additional investment services or activities or
ancillary services not foreseen at the time of initial authorisation shall
submit a request for extension of its authorisation.

3. The authorisation shall be valid for the
entire Community
Ö Union Õ and shall
allow an investment firm to provide the services or perform the activities, for
which it has been authorised, throughout the Community Ö Union Õ , either
through the establishment of a branch or the free provision of services.

Article 7

Procedures for granting and
refusing requests for authorisation

1. The competent authority shall not grant
authorisation unless and until such time as it is fully satisfied that the
applicant complies with all requirements under the provisions adopted pursuant
to this Directive.

2. The investment firm shall provide all
information, including a programme of operations setting out
inter alia the types of business envisaged and the organisational
structure, necessary to enable the competent authority to satisfy itself that
the investment firm has established, at the time of initial authorisation, all
the necessary arrangements to meet its obligations under the provisions of this
Chapter.

3. An applicant shall be informed, within
six months of the submission of a complete application, whether or not
authorisation has been granted.

ê 2010/78/EU
Art. 6.2 (adapted)

ð new

4. In order to ensure consistent application of this Article and of
Article 9(2) to (4), Article 10(1) and (2),
ESMA may ð shall ï develop draft regulatory technical standards to specify:

(a)     the information to be provided to the
competent authorities under Article 7(2) including the programme of
operations;

ð (b) the tasks of nomination
committees required under Article 9 (2) ï

(c)(b) the requirements applicable to the management of investment firms
under Article 9(84)
and the information for the notifications under Article 9(52);

(d)(c) the requirements applicable to shareholders and members with
qualifying holdings, as well as obstacles which may prevent effective exercise
of the supervisory functions of the competent authority, under
Article 10(1) and (2).

ð ESMA shall submit those draft
regulatory technical standards to the Commission by [31 December 2016]. ï

Power is delegated to the Commission to
adopt the regulatory technical standards referred to in the first subparagraph
in accordance with Ö the
procedure laid down in Õ Articles 10
to 14 of Regulation (EU) No 1095/2010.

Ö 5. Õ In order to ensure
uniform conditions of application of Article 7(2) and Article 9(2),
ESMA may ð shall ï develop draft implementing technical standards to determine
standard forms, templates and procedures for the notification or provision of
information provided for in those Articles Ö 7(2) and
Article 9(5) Õ .

ð ESMA shall submit those draft
implementing technical standards to the Commission by [31 December 2016]. ï

Power is conferred on the Commission to
adopt the implementing technical standards referred to in the third Ö first Õ subparagraph
in accordance with Article 15 of Regulation (EU) No 1095/2010.

ê 2004/39/EC
(adapted)

Article 8

Withdrawal of authorisations

The competent authority may withdraw the
authorisation issued to an investment firm where such an investment firm:

(a)     does not make use of the authorisation
within 12 months, expressly renounces the authorisation or has provided no
investment services or performed no investment activity for the preceding six
months, unless the Member State concerned has provided for authorisation to
lapse in such cases;

(b)     has obtained the authorisation by
making false statements or by any other irregular means;

(c)     no longer meets the conditions under
which authorisation was granted, such as compliance with the conditions
set out in Directive 93/6/EEC Ö 2006/49/EC Õ ;

(d)     has seriously and systematically
infringed the provisions adopted pursuant to this Directive governing the
operating conditions for investment firms;

(e)     falls within any of the cases where
national law, in respect of matters outside the scope of this Directive,
provides for withdrawal.

ê 2010/78/EU
Art. 6.3

Every withdrawal of authorisation shall be
notified to ESMA.

ê 2004/39/EC

Article 9

Management
bodyPersons who effectively
direct the business

1. Member States
shall require the persons who effectively direct the business of an
investment firm to be of sufficiently good repute and sufficiently
experienced as to ensure the sound and prudent management of the investment
firm.

Where the market
operator that seeks authorisation to operate an MTF and the persons that
effectively direct the business of the MTF are the same as those that
effectively direct the business of the regulated market, those persons are
deemed to comply with the requirements laid down in the first
subparagraph.

ò new

1. Member States
shall require that all members of the management body of any investment firm shall
at all times be of sufficiently good repute, possess sufficient knowledge,
skills and experience and commit sufficient time to perform their duties. Member
States shall ensure that members of the management body shall, in particular,
fulfil the following requirements:

(a)
Members of the
management body shall commit sufficient time to perform their functions in the
investment firm.

They shall not
combine at the same time more than one of the following combinations:

(i) one executive
directorship with two non-executive directorships

(ii) four
non-executive directorships.

Executive or
non-executive directorships held within the same group shall be considered as
one single directorship.

Competent authorities
may authorise a member of the management body of an investment firm to combine
more directorships than allowed under the previous sub-paragraph, taking into
account individual circumstances and the nature, scale and complexity of the
investment firm's activities.

(b)
The management body
shall possess adequate collective knowledge, skills and experience to be able
to understand the investment firm's activities, and in particular the main risk
involved in those activities.

(c)
Each member of the
management body shall act with honesty, integrity and independence of mind to
effectively assess and challenge the decisions of the senior management.

Member States shall
require investment firms to devote adequate resources to the induction and
training of members of the management body.

Where the market
operator that seeks authorisation to operate an MTF or an OTF and the persons
that effectively direct the business of the MTF or the OTF are the same as the
members of the management body of the regulated market, those persons shall be deemed
to comply with the requirements laid down in the first subparagraph.

2. Member States
shall require investment firms, where appropriate and proportionate in view of
the nature, scale and complexity of their business, to establish a nomination
committee to assess compliance with the first paragraph and to make
recommendations, when needed, on the basis of their assessment. The nomination
committee shall be composed of members of the management body who do not
perform any executive function in the institution concerned. Where, under
national law, the management body does not have any competence in the process
of appointment of its members, this paragraph shall not apply.

3. Member States
shall require investment firms to take into account diversity as one of the
criteria for selection of members of the management body. In particular, taking
into account the size of their management body, investment firms shall put in
place a policy promoting gender, age, educational, professional and
geographical diversity on the management body.

4.         ESMA
shall develop draft regulatory standards to specify the following:

(a)
the notion of
sufficient time commitment of a member of the management body to perform his
functions, in relation to the individual circumstances and the nature, scale
and complexity of activities of the investment firm which competent authorities
must take into account when they authorise a member of the management body to
combine more directorships than permitted as referred to in paragraph 1(a);

(b)
the notion of adequate
collective knowledge, skills and experience of the management body as referred
to in paragraph 1(b),

(c)
to notions of honesty,
integrity and independence of mind of a member of the management body as
referred to in paragraph 1(b),

(d)
the notion of adequate
human and financial resources devoted to the induction and training of members
of the management body,

(e)
the notion of
diversity to be taken into account for the selection of members of the
management body.

Power is
delegated to the Commission to adopt the regulatory technical standards referred
to in the first subparagraph in accordance with Articles 10 to 14 of Regulation
(EU) No 1095/2010.

ESMA shall submit
those draft regulatory technical standards to the Commission by [31 December 2014].

ê 2004/39/EC

ð new

52. Member States shall require the
investment firm to notify the competent authority of ð all members of its management body and of ï any changes to its membershipmanagement,
along with all information needed to assess whether theðfirm complies with paragraphs 1, 2 and 3 of
this Article ïnew staff appointed to manage the firm are of
sufficiently good repute and sufficiently experienced.

ò new

6. Member States
shall require the management body of an investment firm to ensure that the firm
is managed in a sound and prudent way and in a manner that promotes the
integrity of the market and the interest of the its clients. To this end, the
management body shall:

(a)
define, approve and
oversee the strategic objectives of the firm,

(b)
define, approve and
oversee the organization of the firm, including the skills, knowledge and
expertise required to personnel, the resources, the procedures and the
arrangements for the provision of services and activities by the firm, taking
into account the nature, scale and complexity of its business and all the
requirements the firm has to comply with,

(c)
define, approve and
oversee a policy as to services, activities, products and operations offered or
provided by the firm, in accordance with the risk tolerance of the firm and the
characteristics and needs of the clients to whom they will be offered or
provided, including carrying out appropriate stress testing, where appropriate;

(d)
provide effective
oversight of senior management.

The management
body shall monitor and periodically assess the effectiveness of the investment
firm's organization and the adequacy of the policies relating to the provision
of services to clients and take appropriate steps to address any deficiencies.

Members of the
management body in its supervisory function shall have adequate access to
information and documents which are needed to oversee and monitor management
decision-making.

ê 2004/39/EC
(adapted)

ð new

73. The competent
authority shall refuse authorisation if it is not satisfied that the persons
who will effectively direct the business of the investment firm are of
sufficiently good repute or sufficiently experienced, or if there are objective
and demonstrable grounds for believing that proposed changes to the management of the firm
Ö the management body of the firm may Õ pose a threat
to its Ö effective, Õ sound and
prudent management ð and to the adequate consideration of the interest of
its clients and the integrity of the market ï .

84. Member States
shall require that the management of investment firms is undertaken by at least
two persons meeting the requirements laid down in paragraph 1.

By way of derogation from the first
subparagraph, Member States may grant authorisation to investment firms that
are natural persons or to investment firms that are legal persons managed by a
single natural person in accordance with their constitutive rules and national
laws. Member States shall nevertheless require that:

(i)           alternative arrangements be in
place which ensure the sound and prudent management of such investment firms.
ð and the adequate consideration of the interest of
clients and the integrity of the market;ï

(ii)          ð the natural persons concerned are of
sufficiently good repute, possess sufficient knowledge, skills and experience
and commit sufficient time to perform their duties. ï

Article 10

Shareholders and members with
qualifying holdings

1. The competent authorities shall not
authorise the performance of investment services or activities by an investment
firm until they have been informed of the identities of the shareholders or
members, whether direct or indirect, natural or legal persons, that have
qualifying holdings and the amounts of those holdings.

The competent authorities shall refuse
authorisation if, taking into account the need to ensure the sound and prudent
management of an investment firm, they are not satisfied as to the suitability
of the shareholders or members that have qualifying holdings.

Where close links exist between the
investment firm and other natural or legal persons, the competent authority
shall grant authorisation only if those links do not prevent the effective
exercise of the supervisory functions of the competent authority.

2. The competent authority shall refuse
authorisation if the laws, regulations or administrative provisions of a third
country governing one or more natural or legal persons with which the
undertaking has close links, or difficulties involved in their enforcement,
prevent the effective exercise of its supervisory functions.

ò new

3. Member States
shall require that, where the influence exercised by the persons referred to in
the first subparagraph of paragraph 1 is likely to be prejudicial to the sound
and prudent management of an investment firm, the competent authority take
appropriate measures to put an end to that situation.

Such measures may
consist in applications for judicial orders or the imposition of sanctions
against directors and those responsible for management, or suspension of the
exercise of the voting rights attaching to the shares held by the shareholders
or members in question.

ê 2007/44/EC
Art. 3.2 (adapted)

Ö Article 11 Õ

Ö Notification
of proposed acquisitions Õ

13. Member States
shall require any natural or legal person or such persons acting in concert
(hereinafter referred to as the proposed acquirer), who have taken a decision
either to acquire, directly or indirectly, a qualifying holding in an
investment firm or to further increase, directly or indirectly, such a qualifying
holding in an investment firm as a result of which the proportion of the voting
rights or of the capital held would reach or exceed 20 %, 30 % or
50 % or so that the investment firm would become its subsidiary
(hereinafter referred to as the proposed acquisition), first to notify in
writing the competent authorities of the investment firm in which they are
seeking to acquire or increase a qualifying holding, indicating the size of the
intended holding and relevant information, as referred to in Article 13(4)10b(4).

Member States shall require any natural or
legal person who has taken a decision to dispose, directly or indirectly, of a
qualifying holding in an investment firm first to notify in writing the
competent authorities, indicating the size of the intended holding. Such a
person shall likewise notify the competent authorities if he has taken a
decision to reduce his qualifying holding so that the proportion of the voting
rights or of the capital held would fall below 20 %, 30 % or 50 %
or so that the investment firm would cease to be his subsidiary.

Member States need not apply the 30 %
threshold where, in accordance with Article 9(3)(a) of Directive
2004/109/EC, they apply a threshold of one-third.

In determining whether the criteria for a
qualifying holding referred to in Ö Article
10 and in Õ this Article
are fulfilled, Member States shall not take into account voting rights or
shares which investment firms or credit institutions may hold as a result of
providing the underwriting of financial instruments and/or placing of financial
instruments on a firm commitment basis included under point 6 of Section A of
Annex I, provided that those rights are, on the one hand, not exercised or
otherwise used to intervene in the management of the issuer and, on the other,
disposed of within one year of acquisition.

24. The relevant
competent authorities shall work in full consultation with each other when
carrying out the assessment provided for in Article 13(1) 10b(1) (hereinafter
referred to as the assessment) if the proposed acquirer is one of the
following:

(a)
a credit institution, assurance undertaking,
insurance undertaking, reinsurance undertaking, investment firm or UCITS
management company authorised in another Member State or in a sector other than
that in which the acquisition is proposed;

(b)
the parent undertaking of a credit institution,
assurance undertaking, insurance undertaking, reinsurance undertaking,
investment firm or UCITS management company authorised in another Member State
or in a sector other than that in which the acquisition is proposed; or

(c)
a natural or legal person controlling a credit
institution, assurance undertaking, insurance undertaking, reinsurance
undertaking, investment firm or UCITS management company authorised in another
Member State or in a sector other than that in which the acquisition is
proposed.

The competent authorities shall, without
undue delay, provide each other with any information which is essential or
relevant for the assessment. In this regard, the competent authorities shall
communicate to each other upon request all relevant information and shall
communicate on their own initiative all essential information. A decision by
the competent authority that has authorised the investment firm in which the
acquisition is proposed shall indicate any views or reservations expressed by
the competent authority responsible for the proposed acquirer.

ê 2004/39/EC
(adapted)

35. Member States
shall require that, if an investment firm becomes aware of any acquisitions or
disposals of holdings in its capital that cause holdings to exceed or fall
below any of the thresholds referred to in the first subparagraph of
paragraph 13,
that investment firm is to inform the competent authority without delay.

At least once a year, investment firms
shall also inform the competent authority of the names of shareholders and
members possessing qualifying holdings and the sizes of such holdings as shown,
for example, by the information received at annual general meetings of
shareholders and members or as a result of compliance with the regulations
applicable to companies whose transferable securities are admitted to
trading on a regulated market.

46. Member States shall
require that, where the influence exercised by the persons referred to in
the first subparagraph of paragraph 1 is likely to be prejudicial to the
sound and prudent management of an investment firm, the competent authority
take appropriate measures to put an end to that situation.

Such measures may consist in applications for
judicial orders and/or the imposition of sanctions against directors and those
responsible for management, or suspension of the exercise of the
voting rights attaching to the shares held by the shareholders or members
in question.

Similar measures Ö Member
States shall require that competent authorities take measures similar to those
referred to in paragraph 3 of Article 10 Õ shall be taken
in respect of persons who fail to comply with the obligation to provide prior
information in relation to the acquisition or increase of a qualifying holding.
If a holding is acquired despite the opposition of the competent authorities,
the Member States shall, regardless of any other sanctions to be adopted, provide
either for exercise of the corresponding voting rights to be suspended, for the
nullity of the votes cast or for the possibility of their annulment.

ê 2007/44/EC
Art. 3.3 (adapted)

Article 1210a

Assessment period

1. The competent authorities shall,
promptly and in any event within two working days following receipt of the
notification required under the first subparagraph of Article 11(1)(3), as well as
following the possible subsequent receipt of the information referred to in
paragraph 2 of this Article, acknowledge receipt thereof in writing to the
proposed acquirer.

The competent authorities shall have a
maximum of sixty working days as from the date of the written acknowledgement
of receipt of the notification and all documents required by the Member State
to be attached to the notification on the basis of the list referred to in
Article 1310cb(4)
(hereinafter referred to as the assessment period), to carry out the
assessment.

The competent authorities shall inform the
proposed acquirer of the date of the expiry of the assessment period at the
time of acknowledging receipt.

2. The competent authorities may, during
the assessment period, if necessary, and no later than on the 50th working day
of the assessment period, request any further information that is necessary to
complete the assessment. Such request shall be made in writing and shall
specify the additional information needed.

For the period between the date of request
for information by the competent authorities and the receipt of a response
thereto by the proposed acquirer, the assessment period shall be interrupted.
The interruption shall not exceed 20 working days. Any further requests by the
competent authorities for completion or clarification of the information shall
be at their discretion but may not result in an interruption of the assessment
period.

3. The competent authorities may extend the
interruption referred to in the second subparagraph of paragraph 2 up to
30 working days if the proposed acquirer is Ö one of
the following Õ :

(a)
Ö a natural
or legal person Õ situated or
regulated outside the Community Ö Union Õ ; or

(b)
a natural or legal person not subject to
supervision under this Directive or Directives 85/611/EEC,
92/49/EEC[50],
2002/83/EC Ö 2009/65/EC Õ , 2005/68/EC[51]
Ö 2009/138/EC Õ or 2006/48/EC[52].

4. If the competent authorities, upon
completion of the assessment, decide to oppose the proposed acquisition, they
shall, within two working days, and not exceeding the assessment period, inform
the proposed acquirer in writing and provide the reasons for that decision.
Subject to national law, an appropriate statement of the reasons for the
decision may be made accessible to the public at the request of the proposed
acquirer. This shall not prevent a Member State from allowing the competent
authority to make such disclosure in the absence of a request by the proposed
acquirer.

5. If the competent authorities do not
oppose the proposed acquisition within the assessment period in writing, it
shall be deemed to be approved.

6. The competent authorities may fix a
maximum period for concluding the proposed acquisition and extend it where
appropriate.

7. Member States may not impose
requirements for the notification to and approval by the competent authorities
of direct or indirect acquisitions of voting rights or capital that are more
stringent than those set out in this Directive.

ê 2010/78/EU
Art. 6.4 (adapted)

8. In order to ensure consistent application of this Article,
ESMA shall develop draft regulatory technical standards to establish an
exhaustive list of information, referred to in paragraph 4 to be included
by proposed acquirers in their notification, without prejudice to
paragraph 2.

ESMA shall submit those draft regulatory
technical standards to the Commission by 1 January 2014.

Power is delegated to the Commission to
adopt the regulatory technical standards referred to in the first subparagraph
in accordance with Ö the
procedure laid down in Õ Articles 10
to 14 of Regulation (EU) No 1095/2010.

In order to ensure uniform conditions of
application of Articles 10, 10a and 10b, ESMA shall develop draft implementing technical standards to
determine standard forms, templates and procedures for the modalities of the
consultation process between the relevant competent authorities as referred to
in Article 1110a(2)(4).

ESMA shall submit those draft implementing
technical standards to the Commission by 1 January 2014.

Power is conferred on the Commission to
adopt the implementing technical standards referred to in the fourth
subparagraph in accordance with Article 15 of Regulation (EU) No
1095/2010.

ê 2007/44/EC
Art. 3.3

ð new

Article 1310b

Assessment

1. In assessing the notification provided
for in Article 11(1)10(3)
and the information referred to in Article 12(2)10a(2),
the competent authorities shall, in order to ensure the sound and prudent
management of the investment firm in which an acquisition is proposed, and
having regard to the likely influence of the proposed acquirer on the
investment firm, appraise the suitability of the proposed acquirer and the
financial soundness of the proposed acquisition against all of the following
criteria:

(a)
the reputation of the proposed acquirer;

(b)
the reputation and experience of any person who
will direct the business of the investment firm as a result of the proposed
acquisition;

(c)
the financial soundness of the proposed
acquirer, in particular in relation to the type of business pursued and
envisaged in the investment firm in which the acquisition is proposed;

(d)
whether the investment firm will be able to
comply and continue to comply with the prudential requirements based on this
Directive and, where applicable, other Directives, notably, Directives
2002/87/EC and 2006/49/EC, in particular, whether the group of which it will
become a part has a structure that makes it possible to exercise effective
supervision, effectively exchange information among the competent authorities
and determine the allocation of responsibilities among the competent
authorities;

(e)
whether there are reasonable grounds to suspect
that, in connection with the proposed acquisition, money laundering or
terrorist financing within the meaning of Article 1 of Directive
2005/60/EC is being or has been committed or attempted, or that the proposed
acquisition could increase the risk thereof.

In order to take account of future developments
and to ensure the uniform application of this Directive, the Commission, acting
in accordance with the procedure referred to in Article 64(2), may adopt implementing ð The Commission shall be empowered to
adopt by means of delegated acts in accordance with Article 94ï measures which adjust the criteria set out in the first
subparagraph of this paragraph.

2. The competent authorities may oppose the
proposed acquisition only if there are reasonable grounds for doing so on the
basis of the criteria set out in paragraph 1 or if the information
provided by the proposed acquirer is incomplete.

3. Member States shall neither impose any
prior conditions in respect of the level of holding that must be acquired nor
allow their competent authorities to examine the proposed acquisition in terms
of the economic needs of the market.

4. Member States shall make publicly
available a list specifying the information that is necessary to carry out the
assessment and that must be provided to the competent authorities at the time
of notification referred to in Article 11(1)10(3).
The information required shall be proportionate and adapted to the nature of
the proposed acquirer and the proposed acquisition. Member States shall not
require information that is not relevant for a prudential assessment.

5. Notwithstanding Article 12(1)10a(1), (2) and
(3), where two or more proposals to acquire or increase qualifying holdings in
the same investment firm have been notified to the competent authority, the
latter shall treat the proposed acquirers in a non-discriminatory manner.

ê 2004/39/EC
(adapted)

Article 1411

Membership of an authorised
Investor Compensation Scheme

The competent authority shall verify that
any entity seeking authorisation as an investment firm meets its obligations
under Directive 97/9/EC of the European Parliament and of the Council of
3 March 1997 on investor-compensation schemes[53]
at the time of authorisation.

Article 1512

Initial capital endowment

Member States shall ensure that the
competent authorities do not grant authorisation unless the investment firm has
sufficient initial capital in accordance with the requirements of
Directive 93/6/EEC Ö 2006/49/EC Õ having regard
to the nature of the investment service or activity in question.

Pending the
revision of Directive 93/6/EEC, the investment firms provided for in
Article 67 shall be subject to the capital requirements laid down in that
Article.

Article 1613

Organisational requirements

1. The home Member State shall require that
investment firms comply with the organisational requirements set out in
paragraphs 2 to 8 Ö and in
Article 17 Õ .

2. An investment firm shall establish
adequate policies and procedures sufficient to ensure compliance of the firm
including its managers, employees and tied agents with its obligations under
the provisions of this Directive as well as appropriate rules governing
personal transactions by such persons.

3. An investment firm shall maintain and
operate effective organisational and administrative arrangements with a view to
taking all reasonable steps designed to prevent conflicts of interest
as defined in Article 2318
from adversely affecting the interests of its clients.

4. An investment firm shall take reasonable
steps to ensure continuity and regularity in the performance of investment
services and activities. To this end the investment firm shall employ
appropriate and proportionate systems, resources and procedures.

5. An investment firm shall ensure, when
relying on a third party for the performance of operational functions which are
critical for the provision of continuous and satisfactory service to clients
and the performance of investment activities on a continuous and satisfactory
basis, that it takes reasonable steps to avoid undue additional operational
risk. Outsourcing of important operational functions may not be undertaken in
such a way as to impair materially the quality of its internal control and the
ability of the supervisor to monitor the firm's compliance with all
obligations.

An investment firm shall have sound
administrative and accounting procedures, internal control mechanisms,
effective procedures for risk assessment, and effective control and safeguard
arrangements for information processing systems.

ê 2004/39/EC

6. An investment firm shall arrange for
records to be kept of all services and transactions undertaken by it which
shall be sufficient to enable the competent authority to monitor compliance
with the requirements under this Directive, and in particular to ascertain that
the investment firm has complied with all obligations with respect to clients
or potential clients.

ò new

7. Records shall
include the recording of telephone conversations or electronic communications
involving, at least, transactions concluded when dealing on own account and
client orders when the services of reception and transmission of orders and
execution of orders on behalf of clients are provided.

Records of
telephone conversation or electronic communications recorded in accordance with
sub-paragraph 1 shall be provided to the clients involved upon request and
shall be kept for a period of three years.

ê 2004/39/EC

8. An investment firm shall, when holding
financial instruments belonging to clients, make adequate arrangements so as to
safeguard clients' ownership rights, especially in the event of the
investment firm's insolvency, and to prevent the use of a client's
instruments on own account except with the client's express consent.

9. An investment firm shall, when holding
funds belonging to clients, make adequate arrangements to safeguard the
clients' rights and, except in the case of credit institutions, prevent the use
of client funds for its own account.

ò new

10. An investment
firm shall not conclude title transfer collateral arrangements with retail
clients for the purpose of securing or covering clients' present or future,
actual or contingent or prospective obligations.

ê 2004/39/EC
(adapted)

è1 2008/10/EC Art. 1.3(a)

è2 2008/10/EC Art. 1.3(b)

ð new

11. In the case of branches of investment
firms, the competent authority of the Member State in which the branch is
located shall, without prejudice to the possibility of the competent authority
of the home Member State of the investment firm to have direct access to those
records, enforce the obligation laid down in paragraph 6 Ö and 7 Õ with regard to
transactions undertaken by the branch.

12. In order to take account of technical
developments on financial markets and to ensure the uniform application of
paragraphs 2 to 9, the Commission shall ð The Commission shall be empowered to
adopt delegated acts in accordance with Article 94 concerning measures to ï adoptè1 --- ç implementing measures which
specify the concrete organisational requirements laid down in paragraphs 2 to 9
to be imposed on investment firms ð and on branches of third country
firms authorised in accordance with article 43 ï performing different investment services and/or activities and
ancillary services or combinations thereof. è2 Those measures,
designed to amend non-essential elements of this Directive by supplementing it,
shall be adopted in accordance with the regulatory procedure with scrutiny
referred to in Article 64(2). ç

ò new

Article 17

Algorithmic
trading

1. An investment
firm that engages in algorithmic trading shall have in place effective systems
and risk controls to ensure that its trading systems are resilient and have
sufficient capacity, are subject to appropriate trading thresholds and limits
and prevent the sending of erroneous orders or the system otherwise functioning
in a way that may create or contribute to a disorderly market. Such a firm
shall also have in place effective systems and risk controls to ensure the
trading systems cannot be used for any purpose that is contrary to Regulation
(EU) No [MAR] or to the rules of a trading venue to which it is connected. The
firm shall have in place effective continuity business arrangements to deal
with any unforeseen failure of its trading systems and shall ensure its systems
are fully tested and properly monitored to ensure they meet the requirements in
this paragraph.

2. An investment
firm that engages in algorithmic trading shall at least annually provide to its
home Competent Authority a description of the nature of its algorithmic trading
strategies, details of the trading parameters or limits to which the system is
subject, the key compliance and risk controls that it has in place to ensure
the conditions in paragraph 1 are satisfied and details of the testing of its
systems. A competent authority may at any time request further information from
an investment firm about its algorithmic trading and the systems used for that
trading.

3. An algorithmic
trading strategy shall be in continuous operation during the trading hours of
the trading venue to which it sends orders or through the systems of which it
executes transactions. The trading parameters or limits of an algorithmic
trading strategy shall ensure that the strategy posts firm quotes at
competitive prices with the result of providing liquidity on a regular and
ongoing basis to these trading venues at all times, regardless of prevailing
market conditions.

4. An investment
firm that provides direct electronic access to a trading venue shall have in
place effective systems and controls which ensure a proper assessment and
review of the suitability of persons using the service, that persons using the
service are prevented from exceeding appropriate pre set trading and credit thresholds,
that trading by persons using the service is properly monitored and that
appropriate risk controls prevent trading that may create risks to the
investment firm itself or that could create or contribute to a disorderly
market or be contrary to Regulation (EU) No [MAR] or the rules of the trading
venue. The investment firm shall ensure that there is a binding written
agreement between the firm and the person regarding the essential rights and
obligations arising from the provision of the service and that under the
agreement the firm retains responsibility for ensuring trading using that
service complies with the requirements of this Directive, the Regulation (EU)
No [MAR] and the rules of the trading venue.

5. An investment
firm that acts as a general clearing member for other persons shall have in
place effective systems and controls to ensure clearing services are only
applied to persons who are suitable and meet clear criteria and that
appropriate requirements are imposed on those persons to reduce risks to the
firm and to the market. The investment firm shall ensure that there is a
binding written agreement between the firm and the person regarding the
essential rights and obligations arising from the provision of that service.

6. The Commission shall be empowered to adopt
delegated acts in accordance with Article 94 concerning measures
to specify the detailed organisational requirements laid down in
paragraphs 1 to 5 to be imposed on investment firms performing different
investmentservices and/or activities and ancillary services or combinations
thereof.

ê 2004/39/EC

ð new

Article 1814

Trading process and finalisation of
transactions in an MTF ð and an OTF ï

1. Member States shall require that
investment firms or market operators operating an MTF ð or an OTF ï , in addition to meeting the requirements laid down in
Article 1613,
establish transparent and non-discretionary rules and procedures for fair and
orderly trading and establish objective criteria for the efficient execution of
orders.
ð They shall have arrangements for the
sound management of the technical operations of the facility, including the
establishment of effective contingency arrangements to cope with risks of
systems disruption. ï

2. Member States shall require that
investment firms or market operators operating an MTF ð or an OTF ï establish transparent rules regarding the criteria for determining
the financial instruments that can be traded under its systems.

Member States shall require that, where
applicable, investment firms or market operators operating an MTF ð or an OTF ï provide, or are satisfied that there is access to, sufficient
publicly available information to enable its users to form an investment
judgement, taking into account both the nature of the users and the types of
instruments traded.

3. Member States
shall ensure that Articles 19, 21 and 22 are not applicable to the
transactions concluded under the rules governing an MTF between its
members or participants or between the MTF and its members or participants
in relation to the use of the MTF. However, the members of or participants in
the MTF shall comply with the
obligations provided for in Articles 19, 21 and 22 with respect to
their clients when, acting on behalf of their clients, they execute their
orders through the systems of an MTF.Member
States shall require that investment firms or market operators operating an MTF
ð or an OTF ï establish ð , publish ï and maintain transparent rules, based on objective criteria,
governing access to its facility. These rules shall
comply with the conditions established in Article 42(3).

4. Member States shall require that
investment firms or market operators operating an MTF ð or an OTF ï clearly inform its users of their respective responsibilities for
the settlement of the transactions executed in that facility. Member States
shall require that investment firms or market operators operating an MTF ð or an OTF ï have put in place the necessary arrangements to facilitate the
efficient settlement of the transactions concluded under the systems of the MTF
ð or an OTF ï.

5. Where a transferable security, which has
been admitted to trading on a regulated market, is also traded on an MTF ð or an OTF ï without the consent of the issuer, the issuer shall not be subject
to any obligation relating to initial, ongoing or ad hoc financial disclosure
with regard to that MTF ð or an OTF ï.

6. Member States shall require that any
investment firm or market operator operating an MTF ð or an OTF ï comply immediately with any instruction from its competent
authority pursuant to Article 72(1)50(1)
to suspend or remove a financial instrument from trading.

ò new

8. Member States
shall require investment firms and market operators operating an MTF or an OTF
to provide the competent authority with a detailed description of the
functioning of the MTF or OTF. Every authorisation to an investment firm or market
operator as an MTF and an OTF shall be notified to ESMA. ESMA shall establish a
list of all MTFs and OTFs in the Union. The list shall contain information on
the services an MTF or an OTF provides and entail the unique code identifying
the MTF and the OTF for use in reports in accordance with Article 23 and
Articles 5 and 9 of Regulation
(EU) No .../... [MiFIR]. It shall be updated on a regular basis. ESMA
shall publish and keep up-to-date that list on its website.

9. ESMA shall develop
draft implementing technical standards to determine the content and format of
the description and notification referred to in paragraph 8.

ESMA shall submit
those draft implementing technical standards to the Commission by [31 December
2016].

Power is
conferred on the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

Article 19

Specific
requirements for MTFs

1. Member States shall require that
investment firms or market operators operating an MTF, in addition to
meeting the requirements laid down in Articles 16 and 18, shall establish
non-discretionary rules for the execution of orders in the system.

2. Member States
shall require that the rules mentioned in Article 18(4) governing access to an
MTF comply with the conditions established in Article 55(3).

3. Member States
shall require that investment firms or market operators operating an MTF to have arrangements to identify clearly
and manage the potential adverse consequences, for the operation of the MTF or
for its participants, of any conflict of interest between the interest of the
MTF, its owners or its operator and the sound functioning of the MTF.

4. Member States shall require a MTF to
have in place effective systems, procedures and arrangements to comply with the
conditions in Article 51.

5. Member States
shall ensure that Articles 24, 25, 27 and 28 are not applicable to
the transactions concluded under the rules governing an MTF between its
members or participants or between the MTF and its members or participants
in relation to the use of the MTF. However, the members of or
participants in the MTF shall comply with the obligations provided
for in Articles 24, 25, 27 and 28 with respect to their clients when,
acting on behalf of their clients, they execute their orders through the
systems of an MTF.

Article 20

Specific
requirements for OTFs

1. Member States
shall require that investment firms and market operators operating an OTFs
establish arrangements preventing the execution of client orders in an OTF
against the proprietary capital of the investment firm or market operator
operating the OTF. The investment firm shall not act as a systematic
internaliser in an OTF operated by itself. An OTF shall not connect with
another OTF in a way which enables orders in different OTFs to interact.

2. A request for authorisation as an OTF
shall include a detailed explanation why the system does not correspond to and
cannot operate as either a regulated market, MTF, or systematic internaliser.

3. Member States
shall ensure that Articles 24, 25, 27 and 28 are applied to the transactions
concluded on an OTF.

4. Member States
shall require that, where OTFs allow for or enable algorithmic trading to take
place through their systems, they have in place effective systems, procedures
and arrangements to comply with the conditions of Article 51.

ê 2004/39/EC

Article 15

Relations with
third countries

ê 2010/78/EU
Art. 6.5(a)

1. Member States
shall inform the Commission and ESMA of any general difficulties which their
investment firms encounter in establishing themselves or providing investment
services and/or performing investment activities in any third country.

ê 2010/78/EU
Art. 6.5(b)

2. Whenever it
appears to the Commission, on the basis of information submitted to it under
paragraph 1, that a third country does not grant Union investment firms
effective market access comparable to that granted by the Union to investment
firms from that third country, the
Commission, taking into account guidance issued by ESMA, shall submit proposals
to the Council for an appropriate mandate for negotiation with a view to
obtaining comparable competitive opportunities for Union investment firms. The
Council shall act by qualified majority.

The European
Parliament shall be immediately and fully informed at all stages of the
procedure in accordance with Article 217 of the Treaty on the Functioning
of the European Union (TFEU).

ESMA shall assist
the Commission for the purposes of this Article.

ê 2004/39/EC

è1 2008/10/EC Art. 1.4

3. Whenever it
appears to the Commission, on the basis of information submitted to it under
paragraph 1, that Community investment firms in a third country are not
granted national treatment affording the same competitive opportunities as are
available to domestic investment firms and that the conditions of effective
market access are not fulfilled, the Commission may initiate negotiations in
order to remedy the situation.

In the
circumstances referred to in the first subparagraph, the Commission may decide, è1 in accordance with
the regulatory procedure referred to in Article 64(3), ç at any time and in addition to the initiation of
negotiations, that the competent authorities of the Member States must limit or
suspend their decisions regarding requests pending or future requests for
authorisation and the acquisition of holdings by direct or indirect parent
undertakings governed by the law of the
third country in question. Such limitations or suspensions may not be
applied to the setting-up of subsidiaries by investment firms duly authorised
in the Community or by their subsidiaries, or to the acquisition of holdings in
Community investment firms by such firms or subsidiaries. The duration of
such measures may not exceed three months.

Before the end of
the three-month period referred to in the second subparagraph and in the light
of the results of the negotiations, the Commission may decide, è1 in accordance with
the regulatory procedure referred to in Article 64(3), ç to extend these measures.

4. Whenever it
appears to the Commission that one of the situations referred to in
paragraphs 2 and 3 obtains, the Member States shall inform it at
its request:

(a)
of any application for the authorisation of any firm which is the direct or
indirect subsidiary of a parent undertaking governed by the law of the third
country in question;

(b)
whenever they are informed in accordance with Article 10(3) that such a
parent undertaking proposes to acquire a holding in a Community investment
firm, in consequence of which the latter would become its subsidiary.

That obligation to
provide information shall lapse whenever agreement is reached with the
third country concerned or when the measures referred to in the second and
third subparagraphs of paragraph 3 cease to apply.

5. Measures taken
under this Article shall comply with the Community's obligations under any
international agreements, bilateral or multilateral, governing the taking-up
or pursuit of the business of investment firms.

CHAPTER II

OPERATING CONDITIONS FOR INVESTMENT FIRMS

Section 1

General provisions

Article 2116

Regular review of conditions for
initial authorisation

1. Member States shall require that an
investment firm authorised in their territory comply at all times with the
conditions for initial authorisation established in Chapter I of this Title.

2. Member States shall require competent
authorities to establish the appropriate methods to monitor that investment
firms comply with their obligation under paragraph 1. They shall require
investment firms to notify the competent authorities of any material changes to
the conditions for initial authorisation.

ê 2010/78/EU
Art. 6.6

ESMA may develop guidelines regarding the
monitoring methods referred to in this paragraph.

ê 2004/39/EC
(adapted)

è1 2008/10/EC Art. 1.5(a)

ð new

3. In the case of
investment firms which provide only investment advice, Member States may
allow the competent authority to delegate administrative, preparatory or
ancillary tasks related to the review of the conditions for initial
authorisation, in accordance with the conditions laid down in Article 48(2).

Article 2217

General obligation in respect of
on-going supervision

1. Member States shall ensure that the
competent authorities monitor the activities of investment firms so as to
assess compliance with the operating conditions provided for in this Directive.
Member States shall ensure that the appropriate measures are in place to enable
the competent authorities to obtain the information needed to assess the
compliance of investment firms with those obligations.

2. In the case of
investment firms which provide only investment advice, Member States may
allow the competent authority to delegate administrative, preparatory or
ancillary tasks related to the regular monitoring of operational requirements,
in accordance with the conditions laid down
in Article 48(2).

Article 2318

Conflicts of interest

1. Member States shall require investment
firms to take all Ö appropriate Õ reasonable
steps to identify conflicts of interest between themselves, including their managers,
employees and tied agents, or any person directly or indirectly linked to them
by control and their clients or between one client and another that arise in
the course of providing any investment and ancillary services, or combinations
thereof.

2. Where organisational or administrative
arrangements made by the investment firm in accordance with Article 16(3)13(3) to manage
conflicts of interest are not sufficient to ensure, with reasonable confidence,
that risks of damage to client interests will be prevented, the investment firm
shall clearly disclose the general nature and/or sources of conflicts of
interest to the client before undertaking business on its behalf.

3. In order to take account of technical
developments on financial markets and to ensure uniform application of
paragraphs 1 and 2, the Commission shall adoptè1 --- ç implementing
ð The Commission shall be empowered to
adopt by means of delegated acts in accordance with Article 94ï measures to:

(a)
define the steps that investment firms might
reasonably be expected to take to identify, prevent, manage and/or
disclose conflicts of interest when providing various investment and ancillary
services and combinations thereof;

(b)
establish appropriate criteria for determining
the types of conflict of interest whose existence may damage the interests of
the clients or potential clients of the investment firm.

ê 2008/10/EC
Art. 1.5(b)

The measures
referred to in the first subparagraph, designed to amend non-essential
elements of this Directive by supplementing it, shall be adopted in accordance
with the regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC
(adapted)

ð new

Section 2

Provisions to ensure investor protection

Article 2419

Conduct of business obligations when providing
investment services to clients Ö General
principles and information to clients Õ

1. Member States shall require that, when
providing investment services and/or, where appropriate, ancillary services to
clients, an investment firm act honestly, fairly and professionally in
accordance with the best interests of its clients and comply, in particular,
with the principles set out in paragraphs 2 to 8 Ö this
Article and in Article 25 Õ .

2. All information, including marketing
communications, addressed by the investment firm to clients or potential
clients shall be fair, clear and not misleading. Marketing communications shall
be clearly identifiable as such.

3. Appropriate information shall be
provided in a
comprehensible form to clients or potential clients about:

–
the investment firm and its services;, ð when investment advice is provided,
information shall specify
whether the advice is provided on an independent basis and whether it is based
on a broad or on a more restricted analysis of the market and shall indicate
whether the investment firm will provide the client with the on-going
assessment of the suitability of the financial instruments recommended to
clients, ï

–
financial instruments and proposed investment
strategies; this should include appropriate guidance on and warnings of the
risks associated with investments in those instruments or in respect of
particular investment strategies,

–
execution venues, and

–
costs and associated charges.

Ö The
information referred to in the first subparagraph should be provided in a
comprehensible form in such a manner Õ so that
they
Ö clients
or potential clients Õ are reasonably
able to understand the nature and risks of the investment service and of the
specific type of financial instrument that is being offered and, consequently,
to take investment decisions on an informed basis. This information may be
provided in a standardised format.

ê 2004/39/EC
(adapted)

ð new

49. In cases where
an investment service is offered as part of a financial product which is
already subject to other provisions of Community ð Union ï legislation or common European standards related to credit
institutions and consumer credits with respect to risk assessment of
clients and/or information requirements, this service
shall not be additionally subject to the obligations set out in this Article ð paragraphs 2 and 3 ï.

ò new

5. When the
investment firm informs the client that investment advice is provided on an
independent basis, the firm:

(i) shall assess
a sufficiently large number of financial instruments available on the market.
The financial instruments should be diversified with regard to their type and
issuers or product providers and should not be limited to financial instruments
issued or provided by entities having close links with the investment firm,

(ii) shall not
accept or receive fees, commissions or any monetary benefits paid or provided
by any third party or a person acting on behalf of a third party in relation to
the provision of the service to clients.

ò new

6. When providing
portfolio management the investment firm shall not accept or receive fees,
commissions or any monetary benefits paid or provided by any third party or a
person acting on behalf of a third party in relation to the provision of the
service to clients.

7. When an
investment service is offered together with another service or product as part
of a package or as a condition for the same agreement or package, the
investment firm shall inform the client whether it is possible to buy the
different components separately and shall provide for a separate evidence of
the costs and charges of each component.

ESMA shall
develop by [] at the latest, and update periodically, guidelines for the
assessment and the supervision of cross-selling practices indicating, in
particular, situations in which cross-selling practices are not compliant with
obligations in paragraph 1.

ò new

8. The Commission
shall be empowered to adopt delegated acts in accordance with Article 94
concerning measures to ensure that investment firms comply with the
principles set out therein when providing investment or ancillary services to
their clients. Those delegated acts shall take into account:

(a)
the nature of the
service(s) offered or provided to the client or potential client, taking into
account the type, object, size and frequency of the transactions;

(b)
the nature of the
products being offered or considered including different types of financial instruments and deposits
referred to in Article 1 (2) ;

(c)
the retail or
professional nature of the client or potential clients or, in the case of paragraph 3, their classification
as eligible counterparties.

ê 2004/39/EC (adapted)

Ö Article 25 Õ

Ö Assessment
of suitability and appropriateness and reporting to clients Õ

14. When providing
investment advice or portfolio management the investment firm shall obtain the
necessary information regarding the client's or potential client's knowledge
and experience in the investment field relevant to the specific type of product
or service, his financial situation and his investment objectives so as to
enable the firm to recommend to the client or potential client the investment
services and financial instruments that are suitable for him.

ê 2004/39/EC
(adapted)

ð new

25. Member States
shall ensure that investment firms, when providing investment services other
than those referred to in paragraph 14,
ask the client or potential client to provide information regarding his
knowledge and experience in the investment field relevant to the specific type
of product or service offered or demanded so as to enable the investment firm
to assess whether the investment service or product envisaged is appropriate
for the client.

In case Ö Where Õ the investment
firm considers, on the basis of the information received under the previous
subparagraph, that the product or service is not appropriate to the client or
potential client, the investment firm shall warn the client or potential
client. This warning may be provided in a standardised format.

In cases
wWhere the clients or potential clients elects do notnot to provide the
information referred to under the first subparagraph, or where they providehe
provides insufficient information regarding theirhis knowledge and
experience, the investment firm shall warn themthe
client or potential client that such a decision will not allow
the firm Ö is not in
a position Õ to determine
whether the service or product envisaged is appropriate for themhim. This warning
may be provided in a standardised format.

3. Member States shall allow investment
firms when providing investment services that only consist of execution and/or
the reception and transmission of client orders with or without ancillary
services ð , with the exclusion of the ancillary service
specified in Section B (1) of Annex 1 ï, to provide those investment services to their clients without the
need to obtain the information or make the determination provided for in
paragraph 25
where all the following conditions are met:

ê 2010/78/EU
Art. 6.7 (adapted)

ð new

a)-          the
services referred to in the introductory part relate toð any of the following financial instruments: ï

(i)       shares admitted to trading on a regulated market or onin an equivalent
third-country market, ð or on a MTF, where these are shares in companies, and
excluding shares in non-UCITS collective investment undertakings and shares
that embed a derivative; ï

(ii)      ð bonds or other forms of securitised
debt, admitted to trading on a regulated market or on an equivalent third
country market or on a MTF, excluding those that embed a derivative or
incorporate a structure which makes it difficult for the client to understand
the risk involved; ï

(iii)     money market instruments, bonds or other forms of securitised debt
(excluding those bonds or securitised debt ð excluding those ï that embed a derivative), ð or incorporate a structure which makes it difficult
for the client to understand the risk involved; ï

(iv)     ð shares or units in ï UCITS and
ð excluding structured UCITS as referred to in Article
36 paragraph 1 subparagraph 2 of Commission Regulation 583/2010; ï

(v)      other non-complex financial instruments ð for the purpose of this paragraph ï.

ð For the purpose of this point, if the requirements
and the procedure laid down under subparagraphs 3 and 4 of paragraph 1 of
Article 4 of Directive 2003/71/EC [Prospectus
Directive] are fulfilled, a ï A third-country
market shall be considered as equivalent to a regulated market. if it complies
with equivalent requirements to those established under Title III. The
Commission and ESMA shall publish on their websites a list of those markets
that are to be considered as equivalent. That list shall be updated
periodically. ESMA shall assist the Commission in the assessment of
third-country markets,

ê 2004/39/EC
(adapted)

è1 2008/10/EC Art. 1.6(a)

ð new

b)-          the
service is provided at the initiative of the client or potential client,

c)-          the
client or potential client has been clearly informed that in the provision of
this service the investment firm is not required to assess the suitability ð or appropriateness ï of the instrument or service provided or offered and that therefore
he does not benefit from the corresponding protection of the relevant conduct
of business rules. This;
this warning may be provided in a standardised format,

d)-          the
investment firm complies with its obligations under Article 2318.

4. The investment firm shall establish a
record that includes the document or documents agreed between the firm and the
client that set out the rights and obligations of the parties, and the other
terms on which the firm will provide services to the client. The rights and
duties of the parties to the contract may be incorporated by reference to other
documents or legal texts.

5. The client must receive from the
investment firm adequate reports on the service provided to its clients. These
reports shall ð include periodic communications to clients, taking
into account the type and the complexity of financial instruments involved and
the nature of the service provided to the client and shall ï include, where applicable, the costs associated with the
transactions and services undertaken on behalf of the client. ð When providing investment advice,
the investment firm shall specify how the advice given meets the personal
characteristics of the client. ï

9. In cases where an investment service is offered
as part of a financial product which is already subject to other provisions
of Community legislation or common European standards related to credit
institutions and consumer credits with respect to risk assessment of clients
and/or information requirements, this service shall not be additionally subject to the obligations set out in this
Article.

610. In order to ensure the necessary protection of
investors and the uniform application of paragraphs 1 to 8, the Commission
shall adoptè1 --- ç implementing measures ð The Commission shall be empowered to
adopt by means of delegated acts in accordance with Article 94 measures ï to ensure that investment firms comply with the principles set
out therein when providing investment or ancillary services to their clients.
Those delegated actsimplementing
measures shall take into account:

(a)
the nature of the service(s) offered or provided
to the client or potential client, taking into account the type, object, size
and frequency of the transactions;

(b)
the nature of the productsfinancial
instruments being offered or considered ð , including different types of financial instruments
and banking deposits referred to in Article 1 (2) ï ;

(c)
the retail or professional nature of the client
or potential clients ð or, in the case of paragraphs 5, their classification
as eligible counterparties. ï

ê 2008/10/EC
Art. 1.6(b)

The measures
referred to in the first subparagraph, designed to amend non-essential
elements of this Directive by supplementing it, shall be adopted in accordance
with the regulatory procedure with scrutiny referred to in Article 64(2).

ò new

7. ESMA shall
develop by [] at the latest, and update periodically, guidelines for the
assessment of financial instruments incorporating a structure which makes it
difficult for the client to understand the risk involved in accordance with
paragraph 3 (a).

ê 2004/39/EC

Article 2620

Provision of services through the
medium of another investment firm

Member States shall allow an investment
firm receiving an instruction to perform investment or ancillary services on
behalf of a client through the medium of another investment firm to rely on
client information transmitted by the latter firm. The investment firm which
mediates the instructions will remain responsible for the completeness and
accuracy of the information transmitted.

The investment firm which receives an
instruction to undertake services on behalf of a client in this way shall also
be able to rely on any recommendations in respect of the service or transaction
that have been provided to the client by another investment firm. The
investment firm which mediates the instructions will remain responsible for the
appropriateness for the client of the recommendations or advice provided.

The investment firm which receives client
instructions or orders through the medium of another investment firm shall
remain responsible for concluding the service or transaction, based on any such
information or recommendations, in accordance with the relevant provisions of
this Title.

Article 2721

Obligation to execute orders on
terms most favourable to the client

1. Member States shall require that
investment firms take all reasonable steps to obtain, when executing orders,
the best possible result for their clients taking into account price, costs,
speed, likelihood of execution and settlement, size, nature or any other
consideration relevant to the execution of the order. Nevertheless, whenever
there is a specific instruction from the client the investment firm shall
execute the order following the specific instruction.

ò new

2. Member States
shall require that each execution venue makes available to the public, without
any charges, data relating to the quality of execution of transactions on that
venue on at least an annual basis. Periodic reports shall include details about
price, speed of execution and likelihood of execution for individual financial
instruments.

ê 2004/39/EC

è1 2008/10/EC Art. 1.7(a)

ð new

32. Member States
shall require investment firms to establish and implement effective
arrangements for complying with paragraph 1. In particular Member States
shall require investment firms to establish and implement an order execution
policy to allow them to obtain, for their client orders, the best possible
result in accordance with paragraph 1.

43. The order
execution policy shall include, in respect of each class of instruments,
information on the different venues where the investment firm executes its
client orders and the factors affecting the choice of execution venue. It shall
at least include those venues that enable the investment firm to obtain on a
consistent basis the best possible result for the execution of client orders.

Member States shall require that investment
firms provide appropriate information to their clients on their order execution
policy. ð That information shall explain
clearly, in sufficient detail and in a way that can be easily understood by
clients, how orders will be executed by the firm for the client. ï Member States shall require that investment firms obtain the prior
consent of their clients to the execution policy.

Member States shall require that, where the
order execution policy provides for the possibility that client orders may be
executed outside a regulated market ð, MTF or OTF ï or an MTF, the investment
firm shall, in particular, inform its clients about this possibility. Member
States shall require that investment firms obtain the prior express consent of
their clients before proceeding to execute their orders outside a regulated
market ð MTF or OTF ï or an MTF. Investment firms may obtain this consent either in the
form of a general agreement or in respect of individual transactions.

54. Member States
shall require investment firms to monitor the effectiveness of their order
execution arrangements and execution policy in order to identify and, where
appropriate, correct any deficiencies. In particular, they shall assess, on a
regular basis, whether the execution venues included in the order execution
policy provide for the best possible result for the client or whether they need
to make changes to their execution arrangements. Member States shall require
investment firms to notify clients of any material changes to their order
execution arrangements or execution policy.

ð Member States shall require
investment firms to summarize and make public on an annual basis, for each
class of financial instruments, the top five execution venues where they
executed client orders in the preceding year. ï

65. Member States
shall require investment firms to be able to demonstrate to their clients, at
their request, that they have executed their orders in accordance with the
firm's execution policy.

76. In
order to ensure the protection necessary for investors, the fair and orderly
functioning of markets, and to ensure the uniform application of
paragraphs 1, 3 and 4, the Commission shallè1 --- ç adopt
implementing ð The Commission shall be empowered to
adopt delegated acts in accordance with Article 94 ï measures concerning:

(a)
the criteria for determining the relative
importance of the different factors that, pursuant to paragraph 1, may be taken
into account for determining the best possible result taking into account the
size and type of order and the retail or professional nature of the client;

(b)
factors that may be taken into account by an
investment firm when reviewing its execution arrangements and the circumstances
under which changes to such arrangements may be appropriate. In particular, the
factors for determining which venues enable investment firms to obtain on a
consistent basis the best possible result for executing the client orders;

(c)
the nature and extent of the information to be
provided to clients on their execution policies, pursuant to paragraph 43.

ò new

8. ESMA shall
develop draft regulatory technical standards to determine:

a) the specific
content, the format and the periodicity of data related to the quality of
execution to be published in accordance with paragraph 2, taking into account
the type of execution venue and the type of financial instrument concerned;

b) the content
and the format of information to be published by investment firms in accordance
with paragraph 5, second subparagraph.

ESMA shall submit
those draft regulatory technical standards to the Commission by [XXX]

Power is
delegated to the Commission to adopt the regulatory technical standards
referred to in the first subparagraph in accordance with the procedure laid
down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

ê 2008/10/EC
Art. 1.7(b)

The measures
referred to in the first subparagraph, designed to amend non-essential elements
of this Directive by supplementing it, shall be adopted in accordance with the
regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC
(adapted)

è1 2008/10/EC Art. 1.8(a)

ð new

Article 2822

Client order handling rules

1. Member States shall require that
investment firms authorised to execute orders on behalf of clients implement
procedures and arrangements which provide for the prompt, fair and expeditious
execution of client orders, relative to other client orders or the trading
interests of the investment firm.

These procedures or arrangements shall
allow for the execution of otherwise comparable client orders in accordance
with the time of their reception by the investment firm.

2. Member States shall require that, in the
case of a client limit order in respect of shares admitted to trading on a
regulated market which are not immediately executed under prevailing market
conditions, investment firms are, unless the client expressly instructs
otherwise, to take measures to facilitate the earliest possible execution of
that order by making public immediately that client limit order in a manner
which is easily accessible to other market participants. Member States may
decide that investment firms comply with this obligation by transmitting the
client limit order to a regulated market and/or MTF. Member States shall
provide that the competent authorities may waive the obligation to make public
a limit order that is large in scale compared with normal market size as
determined under Article 44(2) Ö 4 of Regulation
(EU) No .../... [MiFIR] Õ .

3. In order to ensure that measures for the
protection of investors and fair and orderly functioning of markets take
account of technical developments in financial markets, and to ensure the
uniform application of paragraphs 1 and 2, the Commission shall adoptè1 --- ç implementing
ð The Commission shall be empowered to
adopt delegated acts in accordance with Article 94 concerning ï measures which define:

(a)
the conditions and nature of the procedures and
arrangements which result in the prompt, fair and expeditious execution of
client orders and the situations in which or types of transaction for which
investment firms may reasonably deviate from prompt execution so as to obtain
more favourable terms for clients;

(b)
 the different methods through which an
investment firm can be deemed to have met its obligation to disclose not
immediately executable client limit orders to the market.

ê 2008/10/EC
Art. 1.8(b)

The measures
referred to in the first subparagraph, designed to amend non-essential elements
of this Directive by supplementing it, shall be adopted in accordance with the
regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC
(adapted)

è1 2010/78/EU Art. 6.8

è2 2008/10/EC Art. 1.9(a)

ð new

Article 2923

Obligations of investment firms
when appointing tied agents

1. Member States shallmay decide to
allow an investment firm to appoint tied agents for the purposes of promoting
the services of the investment firm, soliciting business or receiving orders
from clients or potential clients and transmitting them, placing financial
instruments and providing advice in respect of such financial instruments and
services offered by that investment firm.

2. Member States shall require that where
an investment firm decides to appoint a tied agent it remains fully and
unconditionally responsible for any action or omission on the part of the tied
agent when acting on behalf of the firm. Member States shall require the
investment firm to ensure that a tied agent discloses the capacity in which he
is acting and the firm which he is representing when contacting or before
dealing with any client or potential client.

Member States may
allow, in accordance with Article 13(6), (7) and (8), tied agents
registered in their territory to handle clients' money and/or financial
instruments on behalf and under the full responsibility of the investment firm
for which they are acting within their territory or, in the case of a
cross-border operation, in the territory of a Member State which allows a tied
agent to handle clients' money. ð Member States shall prohibit tied agents registered
in their territory from handling clients' money and/or financial instruments. ï

Member States shall require the investment
firms to monitor the activities of their tied agents so as to ensure that they
continue to comply with this Directive when acting through tied agents.

3. è1 Member States that
decide to allow investment firms to appoint tied agents shall establish a
public register. Tied agents shall be registered in
the public register in the Member State where they are established. ESMA shall
publish on its website references or hyperlinks to the public registers
established under this Article by the Member States that decide to allow
investment firms to appoint tied agents. ç

Where the Member
State in which the tied agent is established has decided, in accordance with
paragraph 1, not to allow the investment firms authorised by their competent
authorities to appoint tied agents, those tied agents shall be registered with
the competent authority of the home Member State of the investment firm on whose behalf it acts.

Member States shall ensure that tied agents
are only admitted to the public register if it has been established that they
are of sufficiently good repute and that they possess appropriate general,
commercial and professional knowledge so as to be able to communicate
accurately all relevant information regarding the proposed service to the
client or potential client.

Member States may decide that investment
firms can verify whether the tied agents which they have appointed are of
sufficiently good repute and possess the knowledge as referred to in the
third subparagraph.

The register shall be updated on a regular
basis. It shall be publicly available for consultation.

4. Member States shall require that
investment firms appointing tied agents take adequate measures in order to
avoid any negative impact that the activities of the tied agent not covered by
the scope of this Directive could have on the activities carried out by the
tied agent on behalf of the investment firm.

Member States may allow competent
authorities to collaborate with investment firms and credit institutions, their
associations and other entities in registering tied agents and in monitoring
compliance of tied agents with the requirements of paragraph 3. In
particular, tied agents may be registered by an investment firm, credit
institution or their associations and other entities under the supervision of
the competent authority.

5. Member States shall require that
investment firms appoint only tied agents entered in the public registers
referred to in paragraph 3.

6. Member States may reinforce the
requirements set out in this Article or add other requirements for tied agents
registered within their jurisdiction.

Article 3024

Transactions executed with eligible
counterparties

1. Member States shall ensure that
investment firms authorised to execute orders on behalf of clients and/or to
deal on own account and/or to receive and transmit orders, may bring about or
enter into transactions with eligible counterparties without being obliged to
comply with the obligations under Articles 2419
ð (with the exception of paragraph 3), 25 (with the
exception of paragraph 5) ï, 2721
and 28(1)22(1)
in respect of those transactions or in respect of any ancillary service
directly related to those transactions.

ð Member States shall ensure that, in
their relationship with eligible counterparties, investment firms act honestly,
fairly and professionally and communicate in a way which is fair, clear and not
misleading, taking into account the nature of the eligible counterparty and of
its business. ï

2. Member States shall recognise as
eligible counterparties for the purposes of this Article investment firms,
credit institutions, insurance companies, UCITS and their management companies,
pension funds and their management companies, other financial institutions
authorised or regulated under Community Ö Union Õ legislation or
the national law of a Member State, undertakings exempted from the application
of this Directive under Article 2(1)(k) and (l), national governments
and their corresponding offices including public bodies that deal with public
debt ð at national level ï , central banks and supranational organisations.

Classification as an eligible counterparty
under the first subparagraph shall be without prejudice to the right of
such entities to request, either on a general form or on a trade-by-trade
basis, treatment as clients whose business with the investment firm is subject
to Articles 2419,
Ö 25, Õ 2721 and 2822.

3. Member States may also recognise as
eligible counterparties other undertakings meeting pre-determined proportionate
requirements, including quantitative thresholds. In the event of a transaction
where the prospective counterparties are located in different jurisdictions,
the investment firm shall defer to the status of the other undertaking as
determined by the law or measures of the Member State in which that undertaking
is established.

Member States shall ensure that the
investment firm, when it enters into transactions in accordance with paragraph
1 with such undertakings, obtains the express confirmation from the
prospective counterparty that it agrees to be treated as an eligible
counterparty. Member States shall allow the investment firm to obtain this
confirmation either in the form of a general agreement or in respect of each
individual transaction.

4. Member States may recognise as eligible
counterparties third country entities equivalent to those categories of
entities mentioned in paragraph 2.

Member States may also recognise as
eligible counterparties third country undertakings such as those mentioned in
paragraph 3 on the same conditions and subject to the same requirements as
those laid down at paragraph 3.

5. In order to ensure the uniform
application of paragraphs 2, 3 and 4 in the light of changing market
practice and to facilitate the effective operation of the single market, the
Commission may adoptè2 --- ç implementing ð The Commission shall be empowered to
adopt delegated acts in accordance with Article 94 to specify ï measures which define:

(a)
the procedures for requesting treatment as
clients under paragraph 2;

(b)
the procedures for obtaining the express
confirmation from prospective counterparties under paragraph 3;

(c)
the predetermined proportionate requirements,
including quantitative thresholds that would allow an undertaking to be
considered as an eligible counterparty under paragraph 3.

ê 2008/10/EC
Art. 1.9(b)

The measures
referred to in the first subparagraph, designed to amend non-essential elements
of this Directive by supplementing it, shall be adopted in accordance with
the regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC

Section 3

Market transparency and integrity

Article 25

Obligation to
uphold integrity of markets, report transactions and maintain records

ê 2010/78/EU
Art. 6.9(a)

1. Without
prejudice to the allocation of responsibilities for enforcing the provisions of
Directive 2003/6/EC of the European Parliament and of the Council of
28 January 2003 on insider dealing and market manipulation (market
abuse)[54], Member States coordinated by ESMA in accordance
with Article 31 of Regulation (EU) No 1095/2010 shall ensure that
appropriate measures are in place to enable the competent authority to monitor
the activities of investment firms to ensure that they act honestly, fairly
and professionally and in a manner which promotes the integrity of the market.

ê 2010/78/EU
Art. 6.9(b)

2. Member States
shall require investment firms to keep at the disposal of the competent
authority, for at least 5 years, the relevant data relating to all transactions
in financial instruments which they have carried out, whether on own account or
on behalf of a client. In the case of transactions carried out on behalf of
clients, the records shall contain all the
information and details of the identity of the client, and the information
required under Directive 2005/60/EC.

ESMA may request
access to that information in accordance with the procedure and under the
conditions set out in Article 35 of Regulation (EU) No 1095/2010.

ê 2004/39/EC

è1 2008/10/EC Art. 1.10(a)

è2 2008/10/EC Art. 1.10(b)

ð new

3. Member States
shall require investment firms which execute transactions in any financial
instruments admitted to trading on a regulated market to report details of such
transactions to the competent authority as quickly as possible, and no later
than the close of the following working day. This obligation shall apply
whether or not such transactions were
carried out on a regulated market.

The competent
authorities shall, in accordance with Article 58, establish the necessary
arrangements in order to ensure that the competent authority of the most
relevant market in terms of liquidity for those financial instruments also
receives this information.

4. The reports
shall, in particular, include details of the names and numbers of the
instruments bought or sold, the quantity, the dates and times of execution and
the transaction prices and means of identifying the investment firms
concerned.

5. Member States
shall provide for the reports to be made to the competent authority either by
the investment firm itself, a third party acting on its behalf or by a
trade-matching or reporting system approved by the competent authority or by
the regulated market or MTF through whose systems the transaction was
completed. In cases where transactions are reported directly to the competent
authority by a regulated market, an MTF, or a trade-matching or reporting system approved by the competent authority, the
obligation on the investment firm laid down in paragraph 3 may be waived.

6. When, in
accordance with Article 32(7), reports provided for under this Article are
transmitted to the competent authority of the host Member State, it shall
transmit this information to the competent authorities of the home Member State
of the investment firm, unless they decide that they do not want to receive
this information.

7. In order to
ensure that measures for the protection of market integrity are modified to
take account of technical developments in financial markets, and to ensure the
uniform application of paragraphs 1 to 5, the Commission may adoptè1 --- ç implementing measures which define the methods
and arrangements for reporting financial transactions, the form and content of
these reports and the criteria for defining a relevant market in accordance
with paragraph 3. è2 Those measures,
designed to amend non-essential elements of this Directive by supplementing
it, shall be adopted in accordance with the regulatory procedure with scrutiny
referred to in Article 64(2). ç

Article 3126

Monitoring of compliance with the
rules of the MTF ð or the OTF ï and with other legal obligations

1. Member States shall require that
investment firms and market operators operating an MTF ð or OTF ï establish and maintain effective arrangements and procedures,
relevant to the MTF ð or OTF ï , for the regular monitoring of the compliance by its users ð or clients ï with theirits
rules. Investment firms and market operators operating an MTF ð or an OTF ï shall monitor the transactions undertaken by their users ð or clients ï under their systems in order to identify breaches of those rules,
disorderly trading conditions or conduct that may involve market abuse.

2. Member States shall require investment
firms and market operators operating an MTF ð or an OTF ï to report significant breaches of its rules or disorderly trading
conditions or conduct that may involve market abuse to the competent authority.
Member States shall also require investment firms and market operators
operating an MTF ð or an OTF ï to supply the relevant information without delay to the authority
competent for the investigation and prosecution of market abuse and to provide
full assistance to the latter in investigating and prosecuting market abuse
occurring on or through its systems.

ò new

Article 32

Suspension
and removal of instruments from trading on an MTF

1. Member States
shall require that an investment firm or a market operator operating an MTF
that suspends or removes from trading a financial instrument makes public this
decision, communicates it to regulated markets, other MTFs and OTFs trading the
same financial instrument and communicates relevant information to the
competent authority. The competent authority shall inform the competent
authorities of the other Member States. Member States shall require that other
regulated markets, MTFs and OTFs trading the same financial instrument shall
also suspend or remove that financial instrument from trading where the suspension or removal is due to the
non-disclosure of information about the issuer or financial instrument except where this could cause significant
damage to the investors' interests or the orderly functioning of the market.
Member States shall require the other regulated markets, MTFs and OTFs to
communicate their decision to their competent authority and all regulated
markets, MTFs and OTFs trading the same financial instrument, including an
explanation if the decision was not to suspend or remove the financial
instrument from trading.

2. ESMA shall
develop draft implementing technical standards to determine format and timing
of the communications and the publication referred to in paragraph 1.

Power is
conferred on the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

ESMA shall submit
those draft implementing technical standards to the Commission by [XXX].

3. The Commission shall be empowered to adopt
delegated acts in accordance with Article 94 to list the specific situations constituting
significant damage to the investors' interests and the orderly functioning of
the internal market referred to in paragraphs 1 and 2 and to determine issues relating to the non-disclosure of
information about the issuer or financial instrument as referred to in paragraph 1.

Article 33

Suspension
and removal of instruments from trading on an OTF

1. Member States
shall require that an investment firm or a market operator operating an OTF
that suspends or removes from trading a financial instrument makes public this
decision, communicates it to regulated markets, MTFs and other OTFs trading the
same financial instrument and communicates relevant information to the
competent authority. The competent authority shall inform the competent
authorities of the other Member States.

2. ESMA shall
develop draft implementing technical standards determining format and timing of
the communications and the publication referred to in paragraph 1.

Power is
conferred on the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

ESMA shall submit
those draft implementing technical standards to the Commission by [XXX].

Article 34

Cooperation
and exchange of information for MTFs and OTFs

1. Member States
shall require that an investment firm or a market operator operating an MTF or
an OTF immediately informs investment firms and market operators of other MTFs,
OTFs and regulated markets of:

(a)
disorderly trading
conditions;

(b)
conduct that may
indicate abusive behaviour within the scope of [add reference MAR]; and

(c)
system disruptions;

in relation to a
financial instrument.

2. ESMA shall
develop draft regulatory technical standards to determine the specific
circumstances that trigger an information requirement as referred to in
paragraph 1.

ESMA shall submit
those draft regulatory technical standards to the Commission by [XXX].

Power is
delegated to the Commission to adopt the regulatory technical standards
referred to in the first subparagraph in accordance with the procedure laid
down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

ê 2004/39/EC

Article 27

Obligation for
investment firms to make public firm quotes

1. Member States
shall require systematic internalisers in shares to publish a firm quote in
those shares admitted to trading on a regulated market for which they are
systematic internalisers and for which there is a liquid market. In the case of
shares for which there is not a liquid market, systematic internalisers shall
disclose quotes to their clients on request.

The provisions of
this Article shall be applicable to systematic internalisers when dealing for
sizes up to standard market size. Systematic internalisers that only deal in
sizes above standard market size shall not be subject to the provisions of this
Article.

Systematic internalisers
may decide the size or sizes at which they will quote. For a particular share
each quote shall include a firm bid and/or offer price or prices for a size or
sizes which could be up to standard market size for the class of shares to
which the share belongs. The price or prices
shall also reflect the prevailing market conditions for that share.

Shares shall be
grouped in classes on the basis of the arithmetic average value of the orders
executed in the market for that share. The standard market size for each
class of shares shall be a size representative of the arithmetic average value
of the orders executed in the market for the shares included in each class of
shares.

The market for
each share shall be comprised of all orders executed in the European Union
in respect of that share excluding those large in scale compared to normal
market size for that share.

ê 2010/78/EU
Art. 6.10

2. The competent
authority of the most relevant market in terms of liquidity as defined in
Article 25 for each share shall determine at least annually, on the
basis of the arithmetic average value of the orders executed in the market in
respect of that share, the class of shares to which it belongs. That
information shall be made public to all market participants and transmitted to ESMA, which shall publish it on its website.

ê 2004/39/EC

è1 2008/10/EC Art. 1.11(a)

3. Systematic
internalisers shall make public their quotes on a regular and continuous basis
during normal trading hours. They shall be entitled to update their quotes
at any time. They shall also be allowed, under exceptional market conditions,
to withdraw their quotes.

The quote shall be
made public in a manner which is easily accessible to other market participants
on a reasonable commercial basis.

Systematic
internalisers shall, while complying with the provisions set down in
Article 21, execute the orders they receive from their retail clients in
relation to the shares for which they are systematic internalisers at the
quoted prices at the time of reception of the order.

Systematic
internalisers shall execute the orders they receive from their professional
clients in relation to the shares for which they are systematic internalisers
at the quoted price at the time of reception of the order. However, they may
execute those orders at a better price in justified cases provided that this
price falls within a public range close to market conditions and provided that
the orders are of a size bigger than the size customarily undertaken by a retail investor.

Furthermore,
systematic internalisers may execute orders they receive from their
professional clients at prices different than their quoted ones without having
to comply with the conditions established in the fourth subparagraph,
in respect of transactions where execution in several securities is part of
one transaction or in respect of orders that are subject to conditions
other than the current market price.

Where a systematic
internaliser who quotes only one quote or whose highest quote is lower than
the standard market size receives an order from a client of a size bigger than
its quotation size, but lower than the standard market size, it may decide to
execute that part of the order which exceeds its quotation size, provided that it is executed at the quoted price,
except where otherwise permitted under the conditions of the previous two
subparagraphs. Where the systematic internaliser is quoting in different sizes
and receives an order between those sizes, which it chooses to execute, it
shall execute the order at one of the quoted prices in compliance with the
provisions of Article 22, except where otherwise permitted under the conditions of the previous two subparagraphs.

4. The competent
authorities shall check:

(a)
that investment firms regularly update bid and/or offer prices published in
accordance with paragraph 1 and maintain prices which reflect the prevailing
market conditions;

(b)
that investment firms comply with the conditions for price improvement laid down
in the fourth subparagraph of paragraph 3.

5. Systematic
internalisers shall be allowed to decide, on the basis of their commercial
policy and in an objective non-discriminatory way, the investors to whom they
give access to their quotes. To that end there shall be clear standards for
governing access to their quotes. Systematic internalisers may refuse to enter
into or discontinue business relationships with investors on the basis of
commercial considerations such as the investor credit status, the counterparty risk and the final settlement of the
transaction.

6. In order to
limit the risk of being exposed to multiple transactions from the same client
systematic internalisers shall be allowed to limit in a non-discriminatory way
the number of transactions from the same client which they undertake to
enter at the published conditions. They shall also be allowed, in a
non-discriminatory way and in accordance with the provisions of Article 22, to
limit the total number of transactions from different clients at the same time provided that this is allowable
only where the number and/or volume of orders sought by clients considerably
exceeds the norm.

7. In order to
ensure the uniform application of paragraphs 1 to 6, in a manner which
supports the efficient valuation of shares and maximises the possibility of
investment firms of obtaining the best deal for their clients, the
Commission shallè1 --- ç adopt implementing measures which:

(a)
specify the criteria for application of paragraphs 1 and 2;

(b)
specify the criteria determining when a quote is published on a regular and
continuous basis and is easily accessible as well as the means by which
investment firms may comply with their obligation to make public their quotes,
which shall include the following possibilities:

(i)
through the facilities of any regulated market which has admitted the
instrument in question to trading;

(ii) through the
offices of a third party;

(iii)
through proprietary arrangements;

(c)
specify the general criteria for determining those transactions where
execution in several securities is part of one transaction or orders that are
subject to conditions other than current market price;

(d)
specify the general criteria for determining what can be considered as
exceptional market circumstances that allow for the withdrawal of quotes as
well as conditions for updating quotes;

(e)
specify the criteria for determining what is a size customarily undertaken by a
retail investor.

(f)
specify the criteria for determining what constitutes considerably exceeding
the norm as set down in paragraph 6;

(g)
specify the criteria for determining when prices fall within a public range
close to market conditions.

ê 2008/10/EC
Art. 1.11(b)

The measures
referred to in the first subparagraph, designed to amend non-essential
elements of this Directive by supplementing it, shall be adopted in accordance
with the regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC

è1 2008/10/EC Art. 1.12(a)

Article 28

Post-trade
disclosure by investment firms

1. Member States
shall, at least, require investment firms which, either on own account or on
behalf of clients, conclude transactions in shares admitted to trading on a regulated
market outside a regulated market or MTF, to make public the volume and price
of those transactions and the time at which they were concluded. This
information shall be made public as close to real-time as possible, on a
reasonable commercial basis, and in a manner
which is easily accessible to other market participants.

2. Member States
shall require that the information which is made public in accordance with
paragraph 1 and the time-limits within which it is published comply with
the requirements adopted pursuant to Article 45. Where the measures
adopted pursuant to Article 45 provide for deferred reporting for certain
categories of transaction in shares, this possibility shall apply
mutatis mutandis to those transactions when undertaken outside regulated markets or MTFs.

3. In order to
ensure the transparent and orderly functioning of markets and the uniform
application of paragraph 1, the Commission shall adoptè1 --- ç implementing measures which:

(a) specify the
means by which investment firms may comply with their obligations under
paragraph 1 including the following possibilities:

(i)
through the facilities of any regulated market which has admitted the
instrument in question to trading or through the facilities of an MTF in
which the share in question is traded;

(ii)
through the offices of a third party;

(iii)
through proprietary arrangements;

(b)
clarify the application of the obligation under paragraph 1 to
transactions involving the use of shares for collateral, lending or other
purposes where the exchange of shares is determined by factors other than the
current market valuation of the share.

ê 2008/10/EC
Art. 1.12(b)

The measures
referred to in the first subparagraph, designed to amend non-essential
elements of this Directive by supplementing it, shall be adopted in accordance
with the regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC

è1 2008/10/EC Art. 1.13(a)

Article 29

Pre-trade transparency
requirements for MTFs

1. Member States
shall, at least, require that investment firms and market operators operating
an MTF make public current bid and offer prices and the depth of trading
interests at these prices which are advertised through their systems in
respect of shares admitted to trading on a regulated market. Member States
shall provide for this information to be made available to the public on
reasonable commercial terms and on a continuous basis during normal trading
hours.

2. Member States
shall provide for the competent authorities to be able to waive the obligation
for investment firms or market operators operating an MTF to make public the
information referred to in paragraph 1 based on the market model or the
type and size of orders in the cases defined
in accordance with paragraph 3. In particular, the competent authorities shall
be able to waive the obligation in respect of transactions that are large in
scale compared with normal market size for the share or type of share in question.

3. In order to
ensure the uniform application of paragraphs 1 and 2, the Commission shallè1 --- ç adopt implementing measures as regards:

(a)
the range of bid and offers or designated market-maker quotes, and the depth of
trading interest at those prices, to be made public;

(b)
the size or type of orders for which pre-trade disclosure may be waived under
paragraph 2;

(c) the market
model for which pre-trade disclosure may be waived under paragraph 2 and in
particular, the applicability of the obligation to trading methods operated
by an MTF which conclude transactions under their rules by reference to prices
established outside the systems of the MTF or by periodic auction.

Except where
justified by the specific nature of the MTF, the content of these
implementing measures shall be equal to that of the implementing measures
provided for in Article 44 for regulated markets.

ê 2008/10/EC
Art. 1.13(b)

The measures
referred to in the first subparagraph, designed to amend non-essential
elements of this Directive by supplementing it, shall be adopted in accordance
with the regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC

è1 2008/10/EC Art. 1.14(a)

Article 30

Post-trade
transparency requirements for MTFs

1. Member States
shall, at least, require that investment firms and market operators operating
an MTF make public the price, volume and time of the transactions executed
under its systems in respect of shares which are admitted to trading on a
regulated market. Member States shall require that details of all such
transactions be made public, on a reasonable commercial basis, as close to
real-time as possible. This requirement shall not apply to details of trades executed on an MTF that are made public under the
systems of a regulated market.

2. Member States
shall provide that the competent authority may authorise investment firms or
market operators operating an MTF to provide for deferred publication of the
details of transactions based on their type or size. In particular, the
competent authorities may authorise the deferred publication in respect of
transactions that are large in scale compared with the normal market size for
that share or that class of shares. Member
States shall require MTFs to obtain the competent authority's prior approval to
proposed arrangements for deferred trade-publication, and shall require that
these arrangements be clearly disclosed to market participants and the
investing public.

3. In order to
provide for the efficient and orderly functioning of financial markets, and to
ensure the uniform application of paragraphs 1 and 2, the Commission shallè1 --- ç adopt implementing measures in respect of:

(a)
the scope and content of the information to be made available to the public;

(b)
the conditions under which investment firms or market operators operating an
MTF may provide for deferred publication of trades and the criteria to be
applied when deciding the transactions for which, due to their size or the
type of share involved, deferred publication is allowed.

Except where
justified by the specific nature of the MTF, the content of these implementing
measures shall be equal to that of the implementing measures provided for in
Article 45 for regulated markets.

ê 2008/10/EC
Art. 1.14(b)

The measures
referred to in the first subparagraph, designed to amend non-essential elements
of this Directive by supplementing it, shall be adopted in accordance with
the regulatory procedure with scrutiny referred to in Article 64(2).

ò new

Section 4

SME markets

Article 35

SME
growth markets

1.         Member
States shall provide that the operator of a MTF may apply to its home competent
authority to have the MTF registered as an SME growth market.

2.         Member
States shall provide that the home competent authority may register the MTF as
an SME growth market if the competent authority receives an application
referred to in paragraph 1 and is satisfied that the requirements in paragraph
3 are complied with in relation to the MTF.

3.         The
MTF shall be subject to effective rules, systems and procedures which ensure
that the following is complied with:

(a)
the majority of
issuers whose financial instruments are admitted to trading on the market are
small and medium-sized enterprises;

(b)
appropriate criteria
are set for initial and ongoing admission to trading of financial instruments
of issuers on the market;

(c)
on initial admission
to trading of financial instruments on the market there is sufficient
information published to enable investors to make an informed judgment about
whether or not to invest in the instruments, either an appropriate admission
document or a prospectus if the requirements in [Directive 2003/71/EC of the
European Parliament and of the Council] are applicable in respect of a public
offer being made in conjunction with the admission to trading;

(d)
there is appropriate
ongoing periodic financial reporting by or on behalf of an issuer on the
market, for example audited annual reports;

(e)
issuers on the market
and persons discharging managerial responsibilities in the issuer and persons
closely associated with them comply with relevant requirements applicable to
them under the Market Abuse Regulation;

(f)
the storage and public
dissemination of regulatory information concerning the issuers on the market;

(g)
there are effective
systems and controls aimed at preventing and detecting market abuse on that
market as required under the Regulation (EU) No .../...
[Market Abuse Regulation].

4. The criteria
in paragraph 3 are without prejudice to compliance by the operator of the MTF
with other obligations under this Directive relevant to the operation of MTFs.
They also do not prevent the operator of the MTF from imposing additional requirements
to those specified in that paragraph.

5. Member States
shall provide that the home competent authority may deregister a MTF as an SME
growth market in any of the following cases:

(a)
 the operator of the
market applies for its deregistration;

(b)
 the requirements in
paragraph 3 are no longer complied with in relation to the MTF.

6.         Members
States shall require that if a home competent authority registers or
deregisters an MTF as an SME growth market under this Article it shall as soon
as possible notify ESMA of that registration. ESMA shall publish on its website
a list of SME growth markets and shall keep the list up to date.

7.         Member
States shall require that where a financial instrument of an issuer is admitted
to trading on one SME growth market, the financial instrument may also be
traded on another SME growth market without the consent of the issuer. In such
a case however, the issuer shall not be subject to any obligation relating to
corporate governance or initial, ongoing or ad hoc disclosure with regard to
the latter SME market.

8.         The Commission shall be empowered to adopt
delegated acts in accordance with Article 94 further specifying the requirements in paragraph 3.
The measures shall take into account the need for the requirements to maintain
high levels of investor protection to promote investor confidence in those
markets while minimising the administrative burdens for issuers on the market.

ê 2004/39/EC
(adapted)

ð new

CHAPTER III

RIGHTS OF INVESTMENT FIRMS

Article 3631

Freedom to provide investment
services and activities

1. Member States shall ensure that any
investment firm authorised and supervised by the competent authorities of
another Member State in accordance with this Directive, and in respect of credit
institutions in accordance with Directive 2000/12/EC Ö 2006/48/EC Õ , may freely
perform investment services and/or activities as well as ancillary services
within their territories, provided that such services and activities are
covered by its authorisation. Ancillary services may only be provided together
with an investment service and/or activity.

Member States shall not impose any
additional requirements on such an investment firm or credit institution in
respect of the matters covered by this Directive.

2. Any investment firm wishing to provide
services or activities within the territory of another Member State for the
first time, or which wishes to change the range of services or activities so
provided, shall communicate the following information to the competent
authorities of its home Member State:

(a)
the Member State in which it intends to operate;

(b)
a programme of operations stating in particular
the investment services and/or activities as well as ancillary services which it
intends to perform and whether it intends to use tied agents in the territory
of the Member States in which it intends to provide services. ð Where an investment firm intends to
use tied agents, the investment firm shall communicate to the competent
authority of its home Member State the identity of those tied agents. ï

ê 2010/78/EU
Art. 6.11(a)

ð new

Where anIn cases where the investment firm intends to use tied agents, the competent authority
of the home Member State of the investment firm shall, at the request of the competent authority of the
host Member State and within a reasonable time, communicate
ð , within one month from the reception of the
information, communicate to the competent authority of the host Member State
designated as contact point in accordance with Article 83(1) ï the identity of the tied agents that the investment firm intends to
use ð to provide services ï in that Member State. The host Member State shallmay publishmake public such
information. ESMA may request access to that information in accordance with the
procedure and under the conditions set out in Article 35 of Regulation
(EU) No 1095/2010.

ê 2004/39/EC

3. The competent authority of the home
Member State shall, within one month of receiving the information, forward it
to the competent authority of the host Member State designated as contact point
in accordance with Article 83(1)56(1).
The investment firm may then start to provide the investment service or
services concerned in the host Member State.

4. In the event of a change in any of the
particulars communicated in accordance with paragraph 2, an investment
firm shall give written notice of that change to the competent authority of the
home Member State at least one month before implementing the change.
The competent authority of the home Member State shall inform the
competent authority of the host Member State of those changes.

ò new

5. Any credit
institution wishing to provide investment services or activities as well as
ancillary services according to paragraph 1 through tied agents shall
communicate to the competent authority of its home Member State the identity of
those tied agents.

Where the credit
institution intends to use tied agents, the competent authority of the home
Member State of the credit institution shall, within one month from the
reception of the information, communicate to the competent authority of the
host Member State designated as contact point in accordance with Article 83(1)
the identity of the tied agents that the credit institution intends to use to
provide services in that Member State. The host Member State shall publish such
information.

ê 2004/39/EC

ð new

65. Member States
shall, without further legal or administrative requirement, allow investment
firms and market operators operating MTFs ð and OTFs ï from other Member States to provide appropriate arrangements on
their territory so as to facilitate access to and use of their systems by
remote users or participants established in their territory.

76. The investment
firm or the market operator that operates an MTF shall communicate to the
competent authority of its home Member State the Member State in which it
intends to provide such arrangements. The competent authority of the home
Member State of the MTF shall communicate, within one month, this information
to the Member State in which the MTF intends to provide such arrangements.

The competent authority of the home Member
State of the MTF shall, on the request of the competent authority of the host
Member State of the MTF and within a reasonable delay, communicate the identity
of the members or participants of the MTF established in that Member State.

ê 2010/78/EU
Art. 6.11(b) (adapted)

ð new

87. In order to ensure
consistent application of this Article, ESMA may ð shall ï develop draft regulatory technical standards to specify the
information to be notified in accordance with paragraphs 2, 4 and 76.

ð ESMA shall submit those draft
regulatory technical standards to the Commission by [31 December 2016]. ï

Power is delegated to the Commission to
adopt the regulatory technical standards referred to in the first subparagraph
in accordance with Ö the
procedure laid down in Õ Articles 10
to 14 of Regulation (EU) No 1095/2010.

ð 9. ï ESMA may ð shall ï develop draft implementing technical standards to establish
standard forms, templates and procedures for the transmission of information in
accordance with paragraphs 3, 4 and 76.

ð ESMA shall submit those draft
implementing technical standards to the Commission by [31 December 2016]. ï

Power is conferred on the Commission to
adopt the implementing technical standards referred to in the firstthird subparagraph
in accordance with Article 15 of Regulation (EU) No 1095/2010.

ê 2004/39/EC
(adapted)

Article 3732

Establishment of a branch

1. Member States shall ensure that
investment services and/or activities as well as ancillary services may be
provided within their territories in accordance with this Directive and
Directive 2000/12/EC Ö 2006/48/EC Õ through the
establishment of a branch provided that those services and activities are
covered by the authorisation granted to the investment firm or the credit
institution in the home Member State. Ancillary services may only be provided
together with an investment service and/or activity.

Member States shall not impose any
additional requirements save those allowed under paragraph 87, on the
organisation and operation of the branch in respect of the matters covered by
this Directive.

2. Member States shall require any
investment firm wishing to establish a branch within the territory of another
Member State first to notify the competent authority of its home Member State
and to provide it with the following information:

(a)
the Member States within the territory of which
it plans to establish a branch;

(b)
a programme of operations setting out
inter alia the investment services and/or activities as well as the
ancillary services to be offered and the organisational structure of the branch
and indicating whether the branch intends to use tied agents Ö and the identity of those tied agents Õ ;

(c)
 the address in the host Member State from which
documents may be obtained;

(d)
 the names of those responsible for the
management of the branch.

WhereIn cases where an
investment firm uses a tied agent established in a Member State outside its
home Member State, such tied agent shall be assimilated to the branch and shall
be subject to the provisions of this Directive relating to branches.

3. Unless the competent authority of the
home Member State has reason to doubt the adequacy of the administrative
structure or the financial situation of an investment firm, taking into account
the activities envisaged, it shall, within three months of receiving all the
information, communicate that information to the competent authority of the
host Member State designated as contact point in accordance with Article 83(1)56(1) and inform
the investment firm concerned accordingly.

4. In addition to the information referred
to in paragraph 2, the competent authority of the home Member State shall
communicate details of the accredited compensation scheme of which the
investment firm is a member in accordance with Directive 97/9/EC to the
competent authority of the host Member State. In the event of a change in the
particulars, the competent authority of the home Member State shall inform the
competent authority of the host Member State accordingly.

5. Where the competent authority of the
home Member State refuses to communicate the information to the competent
authority of the host Member State, it shall give reasons for its refusal to
the investment firm concerned within three months of receiving all the
information.

6. On receipt of a communication from the
competent authority of the host Member State, or failing such communication
from the latter at the latest after two months from the date of transmission of
the communication by the competent authority of the home Member State, the
branch may be established and commence business.

ò new

7. Any credit
institution wishing to use a tied agent established in a Member State outside
its home Member State to provide investment services and/or activities as well
as ancillary services in accordance with this Directive shall notify the
competent authority of its home Member State

Unless the
competent authority of the home Member State has reason to doubt the adequacy
of the administrative structure or the financial situation of a credit
institution, it shall, within three months of receiving all the information,
communicate that information to the competent authority of the host Member
State designated as contact point in accordance with Article 83(1) and
inform the credit institution concerned accordingly.

Where the
competent authority of the home Member State refuses to communicate the
information to the competent authority of the host Member State, it shall give
reasons for its refusal to the credit institution concerned within three months
of receiving all the information.

On receipt of a
communication from the competent authority of the host Member State, or failing
such communication from the latter at the latest after two months from the date
of transmission of the communication by the competent authority of the home
Member State, the tied agent can commence business. Such tied agent shall be
subject to the provisions of this Directive relating to branches.

ê 2004/39/EC
(adapted)

87. The competent
authority of the Member State in which the branch is located shall assume
responsibility for ensuring that the services provided by the branch within its
territory comply with the obligations laid down in Articles 2419, Ö 25, Õ 2721, 2822, 25,
27 and 28 Ö of this
Directive and Articles 13 to 23 of Regulation (EU) No .../... [MiFIR] and Õ in measures
adopted pursuant thereto.

The competent authority of the Member State
in which the branch is located shall have the right to examine branch
arrangements and to request such changes as are strictly needed to enable the
competent authority to enforce the obligations under Articles 2419, Ö 25, Õ 2721, 2822, 25,
27 and 28 Ö of this
Directive and Articles 13 to 23 of Regulation (EU) No .../... [MiFIR] Õ and measures adopted pursuant thereto with respect to the services
and/or activities provided by the branch within its territory.

98. Each Member
State shall provide that, where an investment firm authorised in another Member
State has established a branch within its territory, the competent authority of
the home Member State of the investment firm, in the exercise of its
responsibilities and after informing the competent authority of the host Member
State, may carry out on-site inspections in that branch.

109. In the event
of a change in any of the information communicated in accordance with
paragraph 2, an investment firm shall give written notice of that change
to the competent authority of the home Member State at least one month before
implementing the change. The competent authority of the host Member State shall
also be informed of that change by the competent authority of the home Member
State.

ê 2010/78/EU
Art. 6.12 (adapted)

ð new

1110. In order to ensure
consistent application of this Article, ESMA may ð shall ï develop draft regulatory technical standards to specify the
information to be notified in accordance with paragraphs 2, 4 and 109.

ð ESMA shall submit those draft
regulatory technical standards to the Commission by [31 December 2016]. ï

Power is delegated to the Commission to
adopt the regulatory technical standards referred to in the first subparagraph
in accordance with Ö the
procedure laid down Õ Articles 10
to 14 of Regulation (EU) No 1095/2010.

In order to ensure uniform conditions of
application of this Article, ð 12. ï ESMA may ð shall ï develop draft implementing technical standards to establish
standard forms, templates and procedures for the transmission of information in
accordance with paragraphs 3 and 109.

ð ESMA shall submit those draft
implementing technical standards to the Commission by [31 December 2016]. ï

Power is conferred on the Commission to
adopt the implementing technical standards referred to in the firstthird subparagraph
in accordance with Article 15 of Regulation (EU) No 1095/2010.

ê 2004/39/EC
(adapted)

ð new

Article 3833

Access to regulated markets

1. Member States shall require that investment
firms from other Member States which are authorised to execute client orders or
to deal on own account have the right of membership or have access to regulated
markets established in their territory by means of any of the following
arrangements:

(a) directly, by setting up
branches in the host Member States;

(b) by becoming remote members
of or having remote access to the regulated market without having to be
established in the home Member State of the regulated market, where the trading
procedures and systems of the market in question do not require a physical
presence for conclusion of transactions on the market.

2. Member States shall not impose any
additional regulatory or administrative requirements, in respect of matters
covered by this Directive, on investment firms exercising the right conferred
by paragraph 1.

Article 3934

Access to central counterparty,
clearing and settlement facilities
and right to designate settlement system

1. Member States shall require that
investment firms from other Member States have the right of access to central
counterparty, clearing and settlement systems in their territory for the
purposes of finalising or arranging the finalisation of transactions in
financial instruments.

Member States shall require that access of
those investment firms to such facilities be subject to the same
non-discriminatory, transparent and objective criteria as apply to local
participants. Member States shall not restrict the use of those facilities to
the clearing and settlement of transactions in financial instruments undertaken
on a regulated market or MTF ð or OTF ï in their territory.

2. Member States shall require that
regulated markets in their territory offer all their members or participants
the right to designate the system for the settlement of transactions in
financial instruments undertaken on that regulated market, subject to Ö the
following conditions Õ :

(a)
such links and arrangements between the
designated settlement system and any other system or facility as are necessary
to ensure the efficient and economic settlement of the transaction in question;
and

(b)
agreement by the competent authority responsible
for the supervision of the regulated market that technical conditions for
settlement of transactions concluded on the regulated market through a
settlement system other than that designated by the regulated market are such
as to allow the smooth and orderly functioning of financial markets.

This assessment of the competent authority
of the regulated market shall be without prejudice to the competencies of the
national central banks as overseers of settlement systems or other supervisory
authorities on such systems. The competent authority shall take into account
the oversight/supervision already exercised by those institutions in order to
avoid undue duplication of control.

3. The rights of
investment firms under paragraphs 1 and 2 shall be without prejudice to
the right of operators of central counterparty, clearing or securities
settlement systems to refuse on legitimate commercial grounds to make the
requested services available.

Article 4035

Provisions regarding central
counterparty, clearing and settlement arrangements in respect of MTFs

1. Member States shall not prevent
investment firms and market operators operating an MTF from entering into
appropriate arrangements with a central counterparty or clearing house and a
settlement system of another Member State with a view to providing for the
clearing and/or settlement of some or all trades concluded by market
participants under their systems.

2. The competent authority of investment
firms and market operators operating an MTF may not oppose the use of central
counterparty, clearing houses and/or settlement systems in another Member State
except where this is demonstrably necessary in order to maintain the orderly
functioning of that MTF and taking into account the conditions for settlement
systems established in Article 39(2)34(2).

In order to avoid undue duplication of control,
the competent authority shall take into account the oversight and supervisionoversight/supervision
of the clearing and settlement system already exercised by the national central
banks as overseers of clearing and settlement systems or by other supervisory
authorities with a competence in such systems.

ò new

CHAPTER IV

Provision of
services by third country firms

Section 1

Provision of services with
establishment of a branch

Article 41

Establishment of a branch

1. Member States
shall require that a third country firm intending to provide investment
services or activities together with any ancillary services in their territory through
a branch acquire a prior authorisation by the competent authorities of those
Member States in accordance with the following provisions:

(a)
the Commission has
adopted a decision in accordance with paragraph 3;

(b)
the provision of
services for which the third country firm requests authorisation is subject to
authorisation and supervision in the third country where the firm is
established and the requesting firm is properly authorised. The third country
where the third country firm is established shall not be listed as Non-Cooperative
Country and Territory by the Financial Action Task Force on anti-money laundering
and terrorist financing;

(c)
cooperation
arrangements, that include provisions regulating the exchange of information for the
purpose of preserving the integrity of the market and protecting investors,
are in place between the competent authorities in the Member State concerned
and competent supervisory authorities of the third country where the firm is
established;

(d)
sufficient initial
capital is at free disposal of the branch;

(e)
one or more persons
responsible for the management of the branch are appointed and they comply with
the requirement established under Article 9 (1);

(f)
the third country
where the third country firm is established has signed an agreement with the
Member State where the branch should be established, which fully comply with
the standards laid down in Article 26 of the OECD Model Tax Convention on
Income and on Capital and ensures an effective exchange of information in tax
matters, including, if any, multilateral tax agreements;

(g)
the firm has requested
membership of an investor-compensation scheme authorised or recognised in
accordance with Directive 97/9/EC of the European Parliament and of the Council
of 3 March 1997 on Investor-Compensation Schemes.

2. Member States
shall require that a third country firm intending to provide investment services
or activities together with any ancillary services to retail clients in those
Member States' territory shall establish a branch in the Union.

3. The Commission
may adopt a decision in accordance with the procedure referred to in Article 95
in relation to a third country if the legal and supervisory arrangements of that
third country ensure that firms authorised in that third comply with legally
binding requirements which have equivalent effect to the requirements set out
in this Directive, in Regulation (EU) No .../... [MiFIR] and in Directive
2006/49/EC [Capital Adequacy Directive] and their implementing measures and
that third country provides for equivalent reciprocal recognition of the
prudential framework applicable to investment firms authorised in accordance
with this directive.

The prudential
framework of a third country may be considered equivalent where that framework
fulfils all the following conditions:

(a)
firms providing
investment services and activities in that third country are subject to authorisation
and to effective supervision and enforcement on an ongoing basis;

(b)
firms providing
investment services and activities in that third country are subject to sufficient
capital requirements and appropriate requirements applicable to shareholders
and members of their management body;

(c)
firms providing
investment services and activities are subject to adequate organisational
requirements in the area of internal control functions;

(d)
it ensures market
transparency and integrity by preventing market abuse in the form of insider dealing and market manipulation.

4. The third
country firm referred to in paragraph 1 shall submit its application to the
competent authority of the Member State where it intends to establish a branch
after the adoption by the Commission of the decision determining that the legal
and supervisory framework of the third country in which the third country firm
is authorised is equivalent to the requirements described in paragraph 3.

Article 42

Obligation to provide information

A third country
firm intending to obtain authorisation for the provision of any investment
services or activities together with any ancillary services in the territory of
a Member State shall provide the competent authority of that Member State with
the following:

(a)
the name of the
authority responsible for its supervision in the third country concerned. When
more than one authority is responsible for supervision, the details of the
respective areas of competence shall be provided;

(b)
all relevant details
of the firm (name, legal form, registered office and address, members of the
management body, relevant shareholders) and a programme of operations setting
out the investment services and/or activities as well as the ancillary services
to be provided and the organisational structure of the branch, including a
description of any outsourcing to third parties of essential operating
functions;

(c)
the name of the
persons responsible for the management of the branch and the relevant documents
to demonstrate compliance with requirements under Article 9 (1);

(d)
information about the
initial capital at free disposal of the branch.

Article 43

Granting of the authorisation

1. The competent
authority of the Member State where the third country firm intends to establish
its branch shall only grant the authorisation when the following conditions are
met:

(a)
the competent
authority is satisfied that conditions under Article 41 are fulfilled;

(b)
the competent
authority is satisfied that the branch of the third country firm will be able
to comply with the provisions under paragraph 3.

The third country
firm shall be informed, within six months of the submission of a complete
application, whether or not the authorisation has been granted.

2. The branch of
the third country firm authorised in accordance with paragraph 1, shall comply
with the obligations laid down in Articles 16, 17, 23, 24, 25, 27, 28(1) and 30
of this Directive and in Articles 13 to 23 of Regulation (EU) No .../... [MiFIR] and the measures adopted pursuant
thereto and shall be subject to the supervision of the competent authority in
the Member State where the authorisation was granted.

Member States
shall not impose any additional requirements on the organisation and operation
of the branch in respect of the matters covered by this directive.

Article 44

Provision of services in other Member States

1. A third
country firm authorised in accordance with Article 43 shall be able to provide
the services and activities covered under the authorisation in other Member
States of the Union without the establishment of new branches. To this purpose,
it shall communicate the following information to the competent authority of
the Member State where the branch is established:

(a)
the Member State in
which it intends to operate,

(b)
a programme of
operations stating in particular the investment services or activities as well
as the ancillary services which it intends to perform in that Member State.

The competent
authority of the Member State where the branch is established shall, within one
month from receipt of the information, forward it to the competent authority of
the host Member State designated as contact point in accordance with Article 83(1).
The third country firm may then start to provide the service or the services
concerned in the host Member States.

In the event of a
change in any of the particulars communicated in accordance with the first subparagraph,
the third country firm shall give written notice of that change to the
competent authority of the Member State where the branch is established at
least one month before implementing the change. The competent authority of the
Member State where the branch is established shall inform the competent
authority of the host Member State of those changes.

The firm shall remain
subject to the supervision of the Member State where the branch is established
in accordance with Article 43.

2. ESMA shall
develop draft regulatory technical standards to determine:

(a)
the minimum content of
the cooperation arrangements referred to in Article 41(1)(c), so as to ensure
that the competent authorities of the Member State granting an authorisation to
a third country firm are able to exercise all their supervisory powers under
this directive;

(b)
the detailed content
of the programme of operation as required in Article 42, point b);

(c)
the content of the
documents concerning the management of the branch as required in Article 42,
point c);

(d)
the detailed content
of information regarding the initial capital at free disposal of the branch as
required under Article 42, point d).

ESMA shall submit
those draft regulatory technical standards to the Commission by [XXX].

Power is delegated
to the Commission to adopt the regulatory technical standards referred to in
the first subparagraph in accordance with the procedure laid down in Articles
10 to 14 of Regulation (EU) No 1095/2010.

3. ESMA shall develop
draft implementing technical standards to determine standard forms, template
and procedures for the provision of information and for the notification
provided for in those paragraphs.

ESMA shall submit
those draft implementing technical standards to the Commission by [31 December
2016].

Power is
conferred on the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of
Regulation (EU) No 1095/2010.

4. The Commission shall be empowered to adopt
delegated acts in accordance with Article 94 concerning measures to define the conditions for the
assessment of the sufficient initial capital at free disposal of the branch
taking into account the investment services or activities provided by the
branch and the type of clients to whom they should be provided.

Section 2

Registration and withdrawal of authorisations

Article 45

Registration

Member States
shall register the firms authorised in accordance with Articles 41. The
register shall be publicly accessible and shall contain information on the
services or activities which the third country firms are authorised to provide.
It shall be updated on a regular basis. Every authorisation shall be notified
to the ESMA.

ESMA shall
establish a list of all third country firms authorised to provide services and
activities in the Union. The list shall contain information on the services or
activities for which the non-EU firm is authorised and it shall be updated on a
regular basis. ESMA shall publish that list on its website and update it.

Article 46

Withdrawal
of authorisations

The competent
authority which granted an authorisation under Articles 43 may withdraw the
authorisation issued to a third country firm where such a firm:

(a)
does not make use of
the authorisation within 12 months, expressly renounces the authorisation
or has provided no investment services or performed no investment activity for
the preceding six months, unless the Member State concerned has provided for
the authorisation to lapse in such cases;

(b)
has obtained the
authorisation by making false statements or by any other irregular means;

(c)
no longer meets the
conditions under which authorisation was granted;

(d)
has seriously and
systematically infringed the provisions adopted pursuant to this Directive
governing the operating conditions for investment firms and applicable to third
country firms;

(e)
falls within any of
the cases where national law, in respect of matters outside the scope of this
Directive, provides for withdrawal.

Every withdrawal
of authorisation shall be notified to ESMA.

The withdrawal shall be published on
the list established in Article 45 for a period of 5 years.

ê 2004/39/EC

TITLE III

REGULATED MARKETS

ê 2004/39/EC

Article 4736

Authorisation and applicable law

1. Member States shall reserve
authorisation as a regulated market to those systems which comply with the
provisions of this Title.

Authorisation as a regulated market shall
be granted only where the competent authority is satisfied that both the market
operator and the systems of the regulated market comply at least with the
requirements laid down in this Title.

In the case of a regulated market that is a
legal person and that is managed or operated by a market operator other than
the regulated market itself, Member States shall establish how the different
obligations imposed on the market operator under this Directive are to be
allocated between the regulated market and the market operator.

The operator of the regulated market shall
provide all information, including a programme of operations setting out inter
alia the types of business envisaged and the organisational structure,
necessary to enable the competent authority to satisfy itself that the
regulated market has established, at the time of initial authorisation, all the
necessary arrangements to meet its obligations under the provisions of this
Title.

2. Member States shall require the operator
of the regulated market to perform tasks relating to the organisation and
operation of the regulated market under the supervision of the competent
authority. Member States shall ensure that competent authorities keep under
regular review the compliance of regulated markets with the provisions of this
Title. They shall also ensure that competent authorities monitor that regulated
markets comply at all times with the conditions for initial authorisation
established under this Title.

3. Member States shall ensure that the
market operator is responsible for ensuring that the regulated market that it manages
complies with all requirements under this Title.

Member States shall also ensure that the
market operator is entitled to exercise the rights that correspond to the
regulated market that it manages by virtue of this Directive.

4. Without prejudice to any relevant
provisions of Directive 2003/6/EC, the public law governing the trading
conducted under the systems of the regulated market shall be that of the home
Member State of the regulated market.

5. The competent authority may withdraw the
authorisation issued to a regulated market where it:

(a)
does not make use of the authorisation within
12 months, expressly renounces the authorisation or has not operated for
the preceding six months, unless the Member State concerned has provided for
authorisation to lapse in such cases;

(b)
has obtained the authorisation by making false
statements or by any other irregular means;

(c)
no longer meets the conditions under which
authorisation was granted;

(d)
has seriously and systematically infringed the
provisions adopted pursuant to this Directive;

(e)
falls within any of the cases where national law
provides for withdrawal.

ê 2010/78/EU
Art. 6.13

6. ESMA shall be notified of any withdrawal
of authorisation..

ê 2004/39/EC

Article 4837

Requirements for the management of
the regulated market

1. Member States
shall require the persons who effectively direct the business and the
operations of the regulated market to be of sufficiently good repute and
sufficiently experienced as to ensure the sound and prudent management and
operation of the regulated market. Member States shall also require the
operator of the regulated market to inform the competent authority of the
identity and any other subsequent changes of the persons who effectively direct the business and the operations of the
regulated market.

The competent
authority shall refuse to approve proposed changes where there are objective
and demonstrable grounds for believing that they pose a material threat to the
sound and prudent management and operation of the regulated market.

2. Member States
shall ensure that, in the process of authorisation of a regulated market, the
person or persons who effectively direct the business and the operations of an
already authorised regulated market in accordance with the conditions of
this Directive are deemed to comply with the requirements laid down in
paragraph 1.

ò new

1. Member States
shall require that all members of the management body of any market operator be
at all times of sufficiently good repute, possess sufficient knowledge, skills
and experience and commit sufficient time to perform their duties. Member
States shall ensure that members of the management body shall, in particular,
fulfil the following requirements:

(a)
commit sufficient time
to perform their functions.

They shall not
combine at the same time more than one of the following combinations:

(i) one executive
directorship with two non-executive directorships

(ii) four
non-executive directorships.

Executive or
non-executive directorships held within the same group shall be considered as
one single directorship.

Competent authorities
may authorise a member of the management body of a market operator to combine
more directorships than allowed under the previous sub-paragraph, taking into
account individual circumstances and the nature, scale and complexity of the
investment firm's activities.

(b)
possess adequate
collective knowledge, skills and experience to be able to understand the
regulated market's activities, and in particular the main risk involved in
those activities.

(c)
act with honesty,
integrity and independence of mind to effectively assess and challenge the
decisions of the senior management.

Member States shall
require market operators to devote adequate resources to the induction and
training of members of the management body.

2. Member States
shall require operators of a regulated market to establish a nomination
committee to assess compliance with the provisions of the first paragraph and to
make recommendations, when needed, on the basis of their assessment. The
nomination committee shall be composed of members of the management body who do
not perform any executive function in the market operator concerned.

Competent
authorities may authorise a market operator not to establish a separate
nomination committee taking into account the nature, scale and complexity of
the market operator's activities.

Where, under
national law, the management body does not have any competence in the process
of appointment of its members, this paragraph shall not apply.

3. Member States
shall require market operators to take into account diversity as one of the
criteria for selection of members of the management body. In particular, taking
into account the size of their management body, market operators shall put in
place a policy promoting gender, age, educational, professional and
geographical diversity on the management body.

4. ESMA shall
develop draft regulatory standards to specify the following:

(a)
the notion of
sufficient time commitment of a member of the management body to perform his
functions, in relation to the individual circumstances and the nature, scale
and complexity of activities of the market operator which competent authorities
must take into account when they authorise a member of the management body to
combine more directorships than permitted as referred to in paragraph 1(a);

(b)
the notion of adequate
collective knowledge, skills and experience of the management body as referred
to in paragraph 1(b),

(c)
to notions of honesty,
integrity and independence of mind of a member of the management body as
referred to in paragraph 1(c),

(d)
the notion of adequate
human and financial resources devoted to the induction and training of members
of the management body,

(e)
the notion of
diversity to be taken into account for the selection of members of the
management body.

ESMA shall submit
those draft regulatory technical standards to the Commission by [31 December 2014].

Power is
delegated to the Commission to adopt the regulatory technical standards
referred to in the first subparagraph in accordance with the procedure laid
down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

5. Member States
shall require the operator of the regulated market to notify the competent
authority of the identity of all members of its management body and of any
changes to its membership, along with all information needed to assess whether
the firm complies with paragraphs 1, 2 and 3.

6. The management
body of a market operator shall be able to ensure that the regulated market is
managed in a sound and prudent way and in a manner that promotes the integrity
of the market.

The management
body shall monitor and periodically assess the effectiveness of the regulated
market's organization and take appropriate steps to address any deficiencies.

Members of the
management body in its supervisory function shall have adequate access to
information and documents which are needed to oversee and monitor management
decision-making.

7. The competent
authority shall refuse authorisation if it is not satisfied that the persons
who meant to effectively direct the business of the regulated market are of
sufficiently good repute or sufficiently experienced, or if there are objective
and demonstrable grounds for believing that the management body of the firm may
pose a threat to its effective, sound and prudent management and to the
adequate consideration of the integrity of the market.

Member States
shall ensure that, in the process of authorisation of a regulated market, the
person or persons who effectively direct the business and the operations of an
already authorised regulated market in accordance with the provisions of this
Directive are deemed to comply with the requirements laid down in
paragraph 1.

ê 2004/39/EC

Article 4938

Requirements relating to persons
exercising significant influence over the management
of the regulated market

1. Member States shall require the persons
who are in a position to exercise, directly or indirectly, significant
influence over the management of the regulated market to be suitable.

2. Member States shall require the operator
of the regulated market:

(a)
to provide the competent authority with, and to
make public, information regarding the ownership of the regulated market and/or
the market operator, and in particular, the identity and scale of interests of
any parties in a position to exercise significant influence over the
management;

(b)
to inform the competent authority of and to make
public any transfer of ownership which gives rise to a change in the identity
of the persons exercising significant influence over the operation of the
regulated market.

3. The competent authority shall refuse to
approve proposed changes to the controlling interests of the regulated market
and/or the market operator where there are objective and demonstrable grounds
for believing that they would pose a threat to the sound and prudent management
of the regulated market.

Article 5039

Organisational requirements

Member States shall require the regulated
market:

(a)
to have arrangements to identify clearly and
manage the potential adverse consequences, for the operation of the regulated
market or for its participants, of any conflict of interest between the
interest of the regulated market, its owners or its operator and the sound
functioning of the regulated market, and in particular where such conflicts of
interest might prove prejudicial to the accomplishment of any functions
delegated to the regulated market by the competent authority;

(b)
to be adequately equipped to manage the risks to
which it is exposed, to implement appropriate arrangements and systems to
identify all significant risks to its operation, and to put in place effective
measures to mitigate those risks;

(c)
to have arrangements for the sound management of
the technical operations of the system, including the establishment of
effective contingency arrangements to cope with risks of systems disruptions;

(d)
 to have transparent and non-discretionary rules
and procedures that provide for fair and orderly trading and establish
objective criteria for the efficient execution of orders;

(e)
to have effective arrangements to facilitate the
efficient and timely finalisation of the transactions executed under its
systems;

(f)
to have available, at the time of authorisation
and on an ongoing basis, sufficient financial resources to facilitate its
orderly functioning, having regard to the nature and extent of the transactions
concluded on the market and the range and degree of the risks to which it is
exposed.

ò new

Article 51

Systems
resilience, circuit breakers and electronic trading

1.         Member
States shall require a regulated market to have in place effective systems,
procedures and arrangements to ensure its trading systems are resilient, have sufficient
capacity to deal with peak order and message volumes, are able to ensure
orderly trading under conditions of market stress, are fully tested to ensure
such conditions are met and are subject to effective business continuity
arrangements to ensure continuity of its services if there is any unforeseen
failure of its trading systems.

2. Member States
shall require a regulated market to have in place effective systems, procedures
and arrangements to reject orders that exceed pre-determined volume and price
thresholds or are clearly erroneous and to be able to temporarily halt trading
if there is a significant price movement in a financial instrument on that
market or a related market during a short period and, in exceptional cases, to
be able to cancel, vary or correct any transaction.

3.         Member
States shall require a regulated market to have in place effective systems,
procedures and arrangements to ensure that algorithmic trading systems cannot
create or contribute to disorderly trading conditions on the market including
systems to limit the ratio of unexecuted orders to transactions that may be
entered into the system by a member or participant, to be able to slow down the
flow of orders if there is a risk of its system capacity being reached and to
limit the minimum tick size that may be executed on the market.

4.         Member
States shall require a regulated market that permits direct electronic access
to have in place effective systems procedures and arrangements to ensure that
members or participants are only permitted to provide such services if they are
an authorised investment firm under this Directive, that appropriate criteria
are set and applied regarding the suitability of persons to whom such access
may be provided and that the member or participant retains responsibility for
orders and trades executed using that service.

Member States
shall also require that the regulated market set appropriate standards
regarding risk controls and thresholds on trading through such access and is
able to distinguish and if necessary to stop orders or trading by a person
using direct electronic access separately from orders or trading by the member
or participant.

5.         Member
States shall require a regulated market to ensure that its rules on co-location
services and fee structures are transparent, fair and non-discriminatory.

6.         Member
States shall require that upon request by the competent authority for a
regulated market, that regulated market make available to the competent
authority data relating to the order book or give the competent authority
access to the order book so that it is able to monitor trading.

7.         The Commission shall be empowered to adopt
delegated acts in accordance with Article 94 concerning the requirements laid down in this Article,
and in particular:

(a)
to ensure trading
systems of regulated markets are resilient and have adequate capacity;

(b)
to set out conditions
under which trading should be halted if there is a significant price movement in
a financial instrument on that market or a related market during a short
period;

(c)
to set out the maximum
and minimum ratio of unexecuted orders to transactions that may be adopted by
regulated markets and minimum tick sizes that should be adopted;

(d)
to establish controls
concerning direct electronic access;

(e)
to ensure co-location
services and fee structures are fair and non-discriminatory.

ê 2004/39/EC
(adapted)

è1 Corrigendum,
OJ L 045, 16.2.2005, p. 18

è2 2008/10/EC Art. 1.15(a)

ð new

Article 5240

Admission of financial instruments
to trading

1. Member States shall require that
regulated markets have clear and transparent rules regarding the admission of
financial instruments to trading.

Those rules shall ensure that any financial
instruments admitted to trading in a regulated market are capable of being
traded in a fair, orderly and efficient manner and, in the case of transferable
securities, are freely negotiable.

2. In the case of derivatives, the rules
shall ensure in particular that the design of the derivative contract allows
for its orderly pricing as well as for the existence of effective settlement
conditions.

3. In addition to the obligations set out
in paragraphs 1 and 2, Member States shall require the regulated market to
establish and maintain effective arrangements to verify that issuers of
transferable securities that are admitted to trading on the regulated market
comply with their obligations under Community Ö Union Õ law in respect
of initial, ongoing or ad hoc disclosure obligations.

Member States shall ensure that the
regulated market establishes arrangements which facilitate its members or
participants in obtaining access to information which has been made public
under Community
Ö Union Õ law.

4. Member States shall ensure that
regulated markets have established the necessary arrangements to review
regularly the compliance with the admission requirements of the financial
instruments which they admit to trading.

5. A transferable security that has been
admitted to trading on a regulated market can subsequently be admitted to
trading on other regulated markets, even without the consent of the issuer and
in compliance with the relevant provisions of Directive 2003/71/EC of the
European Parliament and of the Council ofè1 4 November 2003 ç on the
prospectus to be published when securities are offered to the public or
admitted to trading and amending Directive 2001/34/EC[55].
The issuer shall be informed by the regulated market of the fact that its
securities are traded on that regulated market. The issuer shall not be subject
to any obligation to provide information required under paragraph 3
directly to any regulated market which has admitted the issuer's securities to
trading without its consent.

6. In order to ensure the uniform
application of paragraphs 1 to 5, the Commission shallè2 --- ç adopt
implementing
ð The Commission shall adopt by means
of delegated acts in accordance with Article 94 ï measures which:

(a)
specify the characteristics of different classes
of instruments to be taken into account by the regulated market when assessing
whether an instrument is issued in a manner consistent with the conditions laid
down in the second subparagraph of paragraph 1 for admission to trading on
the different market segments which it operates;

(b)
clarify the arrangements that the regulated
market is to implement so as to be considered to have fulfilled its obligation
to verify that the issuer of a transferable security complies with its
obligations under Community
Ö Union Õ law in respect
of initial, ongoing or ad hoc disclosure obligations;

(c)
clarify the arrangements that the regulated
market has to establish pursuant to paragraph 3 in order to facilitate its
members or participants in obtaining access to information which has been made
public under the conditions established by Community Ö Union Õ law.

ê 2008/10/EC
Art. 1.15(b)

The measures
referred to in the first subparagraph, designed to amend non-essential elements
of this Directive by supplementing it, shall be adopted in accordance with the
regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC
(adapted)

ð new

Article 5341

Suspension and removal of
instruments from trading

1. Without prejudice to the right of the
competent authority under Article 72(1)(d)50(2)(j)
and (e)(k)
to demand suspension or removal of an instrument from trading, the operator of
the regulated market may suspend or remove from trading a financial instrument
which no longer complies with the rules of the regulated market unless such a
step would be likely to cause significant damage to the investors' interests or
the orderly functioning of the market.

Notwithstanding
the possibility for the operators of regulated markets to inform directly the
operators of other regulated markets, Member States shall require
that an operator of a regulated market that suspends or removes from trading a
financial instrument makes public
this decision ð , communicates it to other regulated markets, MTFs
and OTFs trading the same financial instrument ï and communicates relevant information to the competent authority.
The competent authority shall inform the competent authorities of the other
Member States Ö of
this Õ .ð Member States shall require that
other regulated markets, MTFs and OTFs trading the same financial instrument
also suspend or remove that financial instrument from trading where the suspension or removal is due to the
non-disclosure of information about the issuer or financial instrument except for cases where this could cause
significant damage to the investors' interests or the orderly functioning of
the market. Member States shall require the other regulated markets, MTFs and
OTFs to communicate their decision to their competent authority and all
regulated markets, MTFs and OTFs trading the same financial instrument,
including an explanation where it was decided not to suspend or remove the
financial instrument from trading. ï

ê 2010/78/EU
Art. 6.14 (adapted)

ð new

2. A competent authority which requests the
suspension or removal of a financial instrument from trading on one or more
regulated markets ð MTFs or OTFs ï shall immediately make public its decision and inform ESMA and the
competent authorities of the other Member States. Save where it is likely to
cause significant damage to the investors’ interests or the orderly functioning
of the internal market, the competent authorities of the other Member States
shall request the suspension or removal of that financial instrument from
trading on the regulated markets, and
MTFs ð and OTFs ï that operate under their supervision.

ò new

3. ESMA shall
develop draft implementing technical standards to determine the format and
timing of the communications and publications referred to in paragraphs 1 and
2.

Power is
conferred on the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

ESMA shall submit
those draft implementing technical standards to the Commission by [XXX].

4. The Commission shall be empowered to adopt
delegated acts in accordance with Article 94 to specify the list of circumstances constituting significant
damage to the investors' interests and the orderly functioning of the internal
market referred to in paragraphs 1 and 2 and to determine issues relating to the non-disclosure of
information about the issuer or financial instrument as referred to in paragraph 1.

Article 54

Cooperation
and exchange of information for regulated markets

1. Member States
shall require that, in relation to a financial instrument, an operator of a
regulated market immediately informs operators of other regulated markets, MTFs
and OTFs of:

(a)
disorderly trading
conditions;

(b)
conduct that may
indicate abusive behaviour within the scope of [add reference MAR]; and

(c)
system disruptions.

2. ESMA shall
develop draft regulatory technical standards to determine the specific
circumstances that trigger an information requirement as referred to in
paragraph 1.

ESMA shall submit
those draft regulatory technical standards to the Commission by [].

Power is
delegated to the Commission to adopt the regulatory technical standards
referred to in the first subparagraph in accordance with the procedure laid
down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

ê 2004/39/EC
(adapted)

ð new

Article 5542

Access to the regulated market

1. Member States shall require the regulated
market to establish and maintain transparent and non-discriminatory rules,
based on objective criteria, governing access to or membership of the regulated
market.

2. Those rules shall specify any
obligations for the members or participants arising from:

(a)
the constitution and administration of the
regulated market;

(b)
rules relating to transactions on the market;

(c)
professional standards imposed on the staff of
the investment firms or credit institutions that are operating on the market;

(d)
the conditions established, for members or
participants other than investment firms and credit institutions, under
paragraph 3;

(e)
the rules and procedures for the clearing and
settlement of transactions concluded on the regulated market.

3. Regulated markets may admit as members
or participants investment firms, credit institutions authorised under
Directive 2000/12/EC Ö 2006/48/EC Õ and other
persons who:

(a)
are of
sufficient good reputefit and proper;

(b)
 have a sufficient level of trading ability, and
competence Ö and
experience Õ ;

(c)
 have, where applicable, adequate organisational
arrangements;

(d)
 have sufficient resources for the role they are
to perform, taking into account the different financial arrangements that the
regulated market may have established in order to guarantee the adequate
settlement of transactions.

4. Member States shall ensure that, for the
transactions concluded on a regulated market, members and participants are not
obliged to apply to each other the obligations laid down in Articles 2419, Ö 25, Õ 2721 and 2822. However, the
members or participants of the regulated market shall apply the obligations
provided for in Articles 2419,
Ö 25, Õ 2721 and 2822 with respect to
their clients when they, acting on behalf of their clients, execute their
orders on a regulated market.

5. Member States shall ensure that the
rules on access to or membership of the regulated market provide for the direct
or remote participation of investment firms and credit institutions.

6. Member States shall, without further
legal or administrative requirements, allow regulated markets from other Member
States to provide appropriate arrangements on their territory so as to
facilitate access to and trading on those markets by remote members or
participants established in their territory.

ê 2010/78/EU
Art. 6.15

The regulated market shall communicate to
the competent authority of its home Member State the Member State in which it
intends to provide such arrangements. The competent authority of the home
Member State shall communicate that information to the Member State in which
the regulated market intends to provide such arrangements within 1 month. ESMA
may request access to that information in accordance with the procedure and
under the conditions set out in Article 35 of Regulation (EU) No
1095/2010.

ê 2004/39/EC
(adapted)

è1 2008/10/EC Art. 1.16(a)

The competent authority of the home Member
State of the regulated market shall, on the request of the competent authority
of the host Member State and within a reasonable time, communicate the identity
of the members or participants of the regulated market established in that
Member State.

7. Member States shall require the operator
of the regulated market to communicate, on a regular basis, the list of the
members and participants of the regulated market to the competent authority of
the regulated market.

Article 5643

Monitoring of compliance with the
rules of the regulated market and with other legal obligations

1. Member States shall require that
regulated markets establish and maintain effective arrangements and procedures
for the regular monitoring of the compliance by their members or participants
with their rules. Regulated markets shall monitor the transactions Ö an oders Õ undertaken by
their members or participants under their systems in order to identify breaches
of those rules, disorderly trading conditions or conduct that may involve
market abuse.

2. Member States shall require the
operators of the regulated markets to report significant breaches of their
rules or disorderly trading conditions or conduct that may involve market abuse
to the competent authority of the regulated market. Member States shall also
require the operator of the regulated market to supply the relevant information
without delay to the authority competent for the investigation and prosecution
of market abuse on the regulated market and to provide full assistance to the
latter in investigating and prosecuting market abuse occurring on or through
the systems of the regulated market.

Article 44

Pre-trade
transparency requirements for regulated markets

1. Member States
shall, at least, require regulated markets to make public current bid and
offer prices and the depth of trading interests at those prices which are
advertised through their systems for shares admitted to trading. Member States
shall require this information to be made available to the public on reasonable commercial terms and on a continuous basis
during normal trading hours.

Regulated markets
may give access, on reasonable commercial terms and on a non-discriminatory
basis, to the arrangements they employ for making public the information
under the first subparagraph to investment firms which are obliged to
publish their quotes in shares pursuant to Article 27.

2. Member States
shall provide that the competent authorities are to be able to waive the
obligation for regulated markets to make public the information referred to
in paragraph 1 based on the market model or the type and size of orders in
the cases defined in accordance with paragraph 3. In particular, the competent
authorities shall be able to waive the obligation in respect of transactions that are large in scale
compared with normal market size for the share or type of share in question.

3. In order to
ensure the uniform application of paragraphs 1 and 2, the Commission shallè1 --- ç adopt implementing measures as regards:

(a) the range of
bid and offers or designated market-maker quotes, and the depth of trading
interest at those prices, to be made public;

(b)
the size or type of orders for which pre-trade disclosure may be waived under
paragraph 2;

(c)
the market model for which pre-trade disclosure may be waived under paragraph
2, and in particular, the applicability of the obligation to trading methods
operated by regulated markets which conclude transactions
under their rules by reference to prices established outside the regulated
market or by periodic auction.

ê 2008/10/EC
Art. 1.16(b)

The measures
referred to in the first subparagraph, designed to amend non-essential elements
of this Directive by supplementing it, shall be adopted in accordance with
the regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC

è1 2008/10/EC Art. 1.17(a)

Article 45

Post-trade
transparency requirements for regulated markets

1. Member States
shall, at least, require regulated markets to make public the price, volume
and time of the transactions executed in respect of shares admitted to trading.
Member States shall require details of all such transactions to be made public,
on a reasonable commercial basis and as
close to real-time as possible.

Regulated markets
may give access, on reasonable commercial terms and on a non-discriminatory
basis, to the arrangements they employ for making public the information under
the first subparagraph to investment firms which are obliged to publish the
details of their transactions in shares pursuant to Article 28.

2. Member States
shall provide that the competent authority may authorise regulated markets to
provide for deferred publication of the details of transactions based on
their type or size. In particular, the competent authorities may authorise the
deferred publication in respect of transactions that are large in scale
compared with the normal market size for that share or that class of shares.
Member States shall require regulated
markets to obtain the competent authority's prior approval of proposed
arrangements for deferred trade-publication, and shall require that these
arrangements be clearly disclosed to market participants and the investing
public.

3. In order to
provide for the efficient and orderly functioning of financial markets, and to
ensure the uniform application of paragraphs 1 and 2, the Commission shallè1 --- ç adopt implementing measures in respect of:

(a)
the scope and content of the information to be made available to the public;

(b)
the conditions under which a regulated market may provide for deferred
publication of trades and the criteria to be applied when deciding the
transactions for which, due to their size or the type of share involved,
deferred publication is allowed.

ê 2008/10/EC
Art. 1.17(b)

The measures
referred to in the first subparagraph, designed to amend non-essential elements
of this Directive by supplementing it, shall be adopted in accordance with
the regulatory procedure with scrutiny referred to in Article 64(2).

ê 2004/39/EC

Article 5746

Provisions regarding central
counterparty and clearing and settlement arrangements

1. Member States shall not prevent regulated
markets from entering into appropriate arrangements with a central counterparty
or clearing house and a settlement system of another Member State with a view
to providing for the clearing and/or settlement of some or all trades concluded
by market participants under their systems.

2. The competent authority of a regulated
market may not oppose the use of central counterparty, clearing houses and/or
settlement systems in another Member State except where this is demonstrably
necessary in order to maintain the orderly functioning of that regulated market
and taking into account the conditions for settlement systems established in
Article 39(2)34(2).

In order to avoid undue duplication of
control, the competent authority shall take into account the oversight/supervision
of the clearing and settlement system already exercised by the national central
banks as overseers of clearing and settlement systems or by other supervisory
authorities with competence in relation to such systems.

ê 2010/78/EU
Art. 6.16

Article 5847

List of regulated markets

Each Member State shall draw up a list of
the regulated markets for which it is the home Member State and shall forward
that list to the other Member States and ESMA. A similar communication shall be
effected in respect of each change to that list. ESMA shall publish and keep
up-to-date a list of all regulated markets on its website.

ò new

TITLE IV

POSITION LIMITS AND REPORTING

Article 59

Position
limits

1. Member States
shall ensure that regulated markets, operators of MTFs and OTFs which admit to
trading or trade commodity derivatives apply limits on the number of contracts
which any given market members or participants can enter into over a specified
period of time, or alternative arrangements with equivalent effect such as
position management with automatic review thresholds , to be imposed in order
to:

(a)
support liquidity;

(b)
prevent market abuse;

(c)
support orderly pricing and settlement
conditions.

The limits or
arrangements shall be transparent and non-discriminatory, specifying the
persons to whom they apply and any exemptions, and taking account of the nature
and composition of market participants and of the use they make of the
contracts admitted to trading. They shall specify clear quantitative thresholds
such as the maximum number of contracts persons can enter, taking account of
the characteristics of the underlying commodity market, including patterns of
production, consumption and transportation to market.

2. Regulated
markets, MTF and OTFs shall inform their competent authority of the details of
the limits or arrangements. The competent authority shall communicate the same
information to ESMA which shall publish and maintain on its website a database
with summaries of the limits or arrangements in force.

3. The Commission shall be empowered to adopt
delegated acts in accordance with Article 94 to determine the limits or alternative arrangements on
the number of contracts which any person can enter into over a specified period
of time and the necessary equivalent effects of the alternative arrangements
established in accordance with paragraph 1, as well as the conditions for
exemptions. The limits or alternative arrangements shall take account of the
conditions referred to in paragraph 1 and the limits that have been set by
regulated markets, MTFs and OTFs. The limits or alternative arrangements determined
in the delegated acts shall also take precedence over any measures imposed by
competent authorities pursuant to Article 72(1) paragraph (g) of this Directive.

4. Competent
authorities shall not impose limits or alternative arrangements which are more restrictive than those adopted pursuant to paragraph 3
except in exceptional cases where they are objectively justified and
proportionate taking into account the liquidity of the specific market and the
orderly functioning of the market. The restrictions shall be valid for an
initial period not exceeding six months from the date of its publication on the
website of the relevant competent authority. Such a restriction may be renewed
for further periods not exceeding six months at a time if the grounds for the
restriction continue to be applicable. If the restriction is not renewed after
that six-month period, it shall automatically expire.

When adopting
more restrictive measures than those adopted pursuant to paragraph 3, competent
authorities shall notify ESMA. The notification shall include a justification
for the more restrictive measures. ESMA shall within 24 hours issue an opinion
on whether it considers the measure is necessary to address the exceptional
case. The opinion shall be published on ESMA's website.

Where a competent
authority takes measures contrary to an ESMA opinion, it shall immediately
publish on its website a notice fully explaining its reasons for doing so.

Article 60

Position
reporting by categories of traders

1. Member States
shall ensure that regulated markets, MTFs, and OTFs which admit to trading or
trade commodity derivatives or emission allowances or derivatives thereof:

(a)
make public a weekly
report with the aggregate positions held by the different categories of traders
for the different financial instruments traded on their platforms in accordance
with paragraph 3;

(b)
provide the competent
authority with a complete breakdown of the positions of any or all market
members or participants, including any positions held on behalf of their
clients, upon request

The obligation
laid down in point (a) shall only apply when both the number of traders and
their open positions in a given financial instrument exceed minimum thresholds.

2. In order to
enable the publication mentioned in point (a) of paragraph 1, Member States
shall require members and participants of regulated markets, MTFs and OTFs to
report to the respective trading venue the details of their positions in
real-time, including any positions held on behalf of their clients.

3. The members,
participants and their clients shall be classified by the regulated market, MTF
or OTF as traders according to the nature of their main business, taking
account of any applicable authorisation, as either:

(a)
 investment firms as
defined in Directive 2004/39/EC or credit institution as defined in Directive
2006/48/EC;

(b)
 investment funds,
either an undertaking for collective investments in transferable securities
(UCITS) as defined in Directive 2009/65/EC, or an alternative investment fund
manager as defined in Directive 2011/61/EC;

(c)
other financial
institutions, including insurance undertakings and reinsurance undertakings as
defined in Directive 2009/138/EC , and institutions for occupational
retirement provision as defined in Directive 2003/41/EC;

(d)
commercial
undertakings;

(e)
in the case of
emission allowances or derivatives thereof, operators with compliance
obligations under Directive 2003/87/EC.

The reports
mentioned in point (a) of paragraph 1 should specify the number of long and
short positions by category of trader, changes thereto since the previous
report, percent of total open interest represented by each category, and the
number of traders in each category.

4. ESMA shall
develop draft implementing technical standards to determine the format of the
reports mentioned in point (a) of paragraph 1, and the content of the
information to be provided in accordance with paragraph 2.

ESMA shall submit
those draft implementing technical standards to the Commission by [XXX].

Power is conferred
on the Commission to adopt the implementing technical standards referred to in
the first subparagraph in accordance with the procedure laid down in Articles 15
of Regulation (EU) No 1095/2010.

In the case of
emission allowances or derivatives thereof, the reporting shall not prejudice
the compliance obligations under Directive 2003/87/EC (Emissions Trading
Scheme).

5. The Commission shall be empowered to adopt
delegated acts in accordance with Article 94 concerning measures to specify the thresholds mentioned in the
last subparagraph of paragraph 1 and to refine the categories of members,
participants or clients mentioned in paragraph 3.

The Commission shall
be empowered to adopt implementing acts in accordance with Article 95 concerning
measures to require all
reports mentioned in point (a) of paragraph 1 to be sent to ESMA at a specified
weekly time, for their centralised publication by the latter.

ò new

Title V

Data reporting services

Section 1

Authorisation procedures for data
reporting services providers

Article 61

Requirement for authorisation

1. Member
States shall require that the provision of data reporting services described in
Annex I, Section D as a regular occupation or business be subject to prior
authorisation in accordance with the provisions of this section. Such
authorisation shall be granted by the home Member State competent authority
designated in accordance with Article 69.

2. By way of
derogation from paragraph 1, Member States shall allow any market operator to
operate the data reporting services of an APA, a CTP and an ARM, subject to the
prior verification of their compliance with the provisions of this Title. Such
a service shall be included in their authorisation.

3. Member States
shall register all data reporting services providers. The register shall be
publicly accessible and shall contain information on the services for which the
data reporting services provider is authorised. It shall be updated on a
regular basis. Every authorisation shall be notified to ESMA.

ESMA shall
establish a list of all data reporting services providers in the Union. The
list shall contain information on the services for which the data reporting
services provider is authorised and it shall be updated on a regular basis.
ESMA shall publish and keep up-to-date that list on its website.

Where a competent
authority has withdrawn an authorisation in accordance with Article 64, that
withdrawal shall be published on the list for a period of 5 years.

Article 62

Scope of authorisation

1. The home
Member State shall ensure that the authorisation specifies the data reporting
service which the data reporting services provider is authorised to provide. A
data reporting services provider seeking to extend its business to additional
data reporting services shall submit a request for extension of its
authorisation.

2. The
authorisation shall be valid for the entire Union and shall allow a data
reporting services provider to provide the services, for which it has been
authorised, throughout the Union.

Article 63

Procedures for granting and refusing requests for
authorisation

1. The competent
authority shall not grant authorisation unless and until such time as it is
fully satisfied that the applicant complies with all requirements under
the provisions adopted pursuant to this Directive.

2. The data
reporting services provider shall provide all information, including a
programme of operations setting out inter alia the types of services
envisaged and the organisational structure, necessary to enable the competent
authority to satisfy itself that the data reporting services provider has
established, at the time of initial authorisation, all the necessary arrangements
to meet its obligations under the provisions of this Title.

3. An applicant
shall be informed, within six months of the submission of a complete
application, whether or not authorisation has been granted.

4. ESMA shall
develop draft regulatory technical standards to determine:

(a)
the information to be
provided to the competent authorities under paragraph 2, including the
programme of operations;

(b)
the information
included in the notifications under Article 65 paragraph 4.

ESMA shall submit
the draft regulatory technical standards referred to in the first subparagraph
to the Commission by [...].

Power is
delegated to the Commission to adopt the regulatory technical standards
referred to in the first subparagraph in accordance with Articles 10 to 14 of
Regulation (EU) No 1095/2010.

5. ESMA shall develop
draft implementing technical standards to determine standard forms, templates
and procedures for the notification or provision of information provided for in
paragraph 2 and in Article 65(4).

ESMA shall submit
those draft implementing technical standards to the Commission by [31 December
2016].

Power is
conferred on the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of
Regulation (EU) No 1095/2010.

Article 64

Withdrawal of authorisations

The competent
authority may withdraw the authorisation issued to a data reporting services
provider where the provider:

(a)
does not make use of
the authorisation within 12 months, expressly renounces the authorisation
or has provided no data reporting services for the preceding six months, unless
the Member State concerned has provided for authorisation to lapse in such
cases;

(b)
has obtained the
authorisation by making false statements or by any other irregular means;

(c)
no longer meets the
conditions under which authorisation was granted;

(d)
has seriously and
systematically infringed the provisions of this Directive.

Article 65

Requirements for the management body of a data
reporting services provider

1. Member States
shall require that all members of the management body of a data reporting
services provider shall at all times be of sufficiently good repute, possess
sufficient knowledge, skills and experience and commit sufficient time to
perform their duties.

The management
body shall possess adequate collective knowledge, skills and experience to be
able to understand the activities of the data reporting services provider. Member
States shall ensure that ech member of the management body shall act with
honesty, integrity and independence of mind to effectively assess and challenge
the decisions of the senior management.

Where a market
operator seeks authorisation to operate an APA, a CTP or an ARM and the members
of the management body of the APA, the CTP or the ARM are the same as the
members of the management body of the regulated market, those persons are
deemed to comply with the requirement laid down in the first subparagraph.

2. ESMA shall
develop guidelines for the assessment of the suitability of the members of the
management body described in paragraph 1, taking into account different roles
and functions carried out by them.

3. Member States
shall require the data reporting services provider to notify the competent
authority of all members of its management body and of any changes to its
membership, along with all information needed to assess whether the entity
complies with paragraph 1 of this Article.

4. The management
body of a data reporting services provider shall be able to ensure that the
entity is managed in a sound and prudent way and in a manner that promotes the
integrity of the market and the interest of its clients.

5. The competent
authority shall refuse authorisation if it is not satisfied that the person or
the persons who shall effectively direct the business of the data reporting
services provider are of sufficiently good repute, or if there are objective
and demonstrable grounds for believing that proposed changes to the management
of the provider pose a threat to its sound and prudent management and to the
adequate consideration of the interest of its clients and the integrity of the
market.

Section 2

Conditions for approved publication
arrangements (APAs)

Article 66

Organisational requirements

1. The home
Member State shall require an APA to have adequate policies and arrangements in
place to make public the information required under Articles 19 and 20 of
Regulation (EU) No .../... [MiFIR] as close
to real time as is technically possible, on a reasonable commercial basis. The
information shall be made available free of charge 15 minutes after the
publication of a transaction. The home Member State shall require the APA to be
able to efficiently and consistently disseminate such information in a way that
ensures fast access to the information, on a non-discriminatory basis and in a
format that facilitates the consolidation of the information with similar data
from other sources.

2. The home
Member State shall require the APA to operate and maintain effective
administrative arrangements designed to prevent conflicts of interest with its
clients.

3. The home
Member State shall require the APA to have sound security mechanisms in place
designed to guarantee the security of the means of transfer of information,
minimise the risk of data corruption and unauthorised access and to prevent
information leakage before publication. The APA shall maintain adequate
resources and have back-up facilities in place in order to offer and maintain
its services at all times.

4. The home
Member State shall require the APA to have systems in place that can
effectively check trade reports for completeness, identify omissions and
obvious errors and request re-transmission of any such erroneous reports.

5. In order to
ensure consistent harmonisation of paragraph 1, ESMA shall develop draft
regulatory technical standards to determine common formats, data standards and
technical arrangements facilitating the consolidation of information as
referred to in paragraph 1.

ESMA shall submit
the draft regulatory technical standards referred to in the first subparagraph
to the Commission by [...].

Power is
delegated to the Commission to adopt the regulatory technical standards
referred to in the first subparagraph in accordance with Articles 10 to 14 of
Regulation (EU) No 1095/2010.

6. The Commission
shall be empowered to adopt delegated acts in accordance with Article 94 clarifying what constitutes a reasonable
commercial basis to make information public as referred to in paragraph 1.

7. The Commission
shall be empowered to adopt delegated acts in accordance with Article 94 specifying:

(a)
the means by which an APA
may comply with the information obligation referred to in paragraph 1;

(b)
the content of the
information published under paragraph 1.

Section 3

Conditions for consolidated tape providers
(CTPs)

Article 67

Organisational requirements

1. The home
Member State shall require a CTP to have adequate policies and arrangements in
place to collect the information made public in accordance with Articles 5 and
19 of Regulation (EU) No .../... [MiFIR],
consolidate it into a continuous electronic data stream and make the
information available to the public as close to real time as is technically
possible, on a reasonable commercial basis including, at least, the following
details:

(a)
the identifier of the
financial instrument;

(b)
the price at which the
transaction was concluded;

(c)
the volume of the
transaction;

(d)
the time of the
transaction;

(e)
the time the
transaction was reported;

(f)
the price notation of
the transaction;

(g)
the trading venue the
transaction was executed on or otherwise the code "OTC";

(h)
if applicable, an
indicator that the transaction was subject to specific conditions.

The information
shall be made available free of charge 15 minutes after the publication of a
transaction. The home Member State shall require the CTP to be able to
efficiently and consistently disseminate such information in a way that ensures
fast access to the information, on a non-discriminatory basis and in formats
that are easily accessible and utilisable for market participants.

2. The home
Member State shall require a CTP to have adequate policies and arrangements in
place to collect the information made public in accordance with Articles 9 and 20
of Regulation (EU) No .../... [MiFIR], consolidate
it into a continuous electronic data stream and make following information
available to the public as close to real time as is technically possible, on a
reasonable commercial basis including, at least, the following details:

(a)
the identifier or
identifying features of the financial instrument;

(b)
the price at which the
transaction was concluded;

(c)
the volume of the
transaction;

(d)
the time of the
transaction;

(e)
the time the
transaction was reported;

(f)
the price notation of
the transaction;

(g)
the trading venue the
transaction was executed on or otherwise the code "OTC";

(h)
if applicable, an
indicator that the transaction was subject to specific conditions.

The information
shall be made available free of charge 15 minutes after the publication of a
transaction. The home Member State shall require the CTP to be able to
efficiently and consistently disseminate such information in a way that ensures
fast access to the information, on a non-discriminatory basis and in generally
accepted formats that are interoperable and easily accessible and utilisable
for market participants.

3. The home
Member State shall require the CTP to ensure that the data provided is
consolidated from at least the regulated markets, MTFs, OTFs and APAs and for
the financial instruments specified by delegated acts under paragraph 8(c).

4. The home
Member State shall require the CTP to operate and maintain effective
administrative arrangements designed to prevent conflicts of interest. In
particular, a market operator or an APA, who also operate a consolidated tape, shall
treat all information collected in a non-discriminatory fashion and shall
operate and maintain appropriate arrangements to separate different business
functions.

5. The home
Member State shall require the CTP to have sound security mechanisms in place
designed to guarantee the security of the means of transfer of information and
to minimise the risk of data corruption and unauthorised access. The home
Member State shall require the CTP to maintain adequate resources and have
back-up facilities in place in order to offer and maintain its services at all
times.

6. In order to
ensure consistent harmonisation of paragraphs 1 and 2, ESMA shall develop draft
regulatory technical standards to determine data standards and formats for the information to be published in
accordance with Articles 5, 9,
19 and 20 of Regulation (EU)
No .../...
[MiFIR], including instrument identifier, price, quantity, time, price
notation, venue identifier and indicators for specific conditions the
transactions was subject to as well as technical arrangements promoting an efficient and
consistent dissemination of information in a way ensuring for it to be easily
accessible and utilisable for market participants as referred to in paragraphs
1 and 2, including identifying additional services the CTP could perform which increase
the efficiency of the market.

ESMA shall submit
the draft regulatory technical standards referred to in the first subparagraph
to the Commission by [...] in respect of information published in accordance with
Articles 5 and 19 of Regulation
(EU) No .../... [MiFIR] and by [...] in respect of information
published in accordance with Articles 9 and 20 of Regulation (EU) No .../... [MiFIR].

Power is
delegated to the Commission to adopt the regulatory technical standards
referred to in the first subparagraph in accordance with Articles 10 to 14 of
Regulation (EU) No 1095/2010.

7. The
Commission shall be empowered to adopt delegated acts in accordance with
Article 94 concerning measures clarifying what constitutes a
reasonable commercial basis to provide access to data streams as referred to in
paragraphs 1 and 2.

8. The
Commission shall be empowered to adopt delegated acts in accordance with
Article 94 concerning measures
specifying:

(a)
the means by which the
CTP may comply with the information obligation referred
to in paragraphs 1 and 2;

(b)
the content of the
information published under paragraphs 1 and 2;

(c)
the trading venues and
APAs and the financial instruments data of which must be provided in the data
stream;

(d)
other means to
ensure that the data published by different CTPs
is consistent and allows for comprehensive mapping and cross-referencing
against similar data from other sources.

Section 4

Conditions for approved reportings
mechanisms (ARMs)

Organisational requirements

Article 68

1. The home
Member State shall require an ARM to have adequate policies and arrangements in
place to report the information required under Article 23 of Regulation (EU) No .../... [MiFIR] as quickly as possible, and no
later than the close of the following working day. Such information shall be
reported in accordance with the requirements laid down in Article 23 of
Regulation (EU) No .../... [MiFIR] on a
reasonable commercial basis.

2. The home
Member State shall require the ARM to operate and maintain effective
administrative arrangements designed to prevent conflicts of interest with its
clients.

3. The home
Member State shall require the ARM to have sound security mechanisms in place
designed to guarantee the security of the means of transfer of information,
minimise the risk of data corruption and unauthorised access and to prevent
information leakage before publication. The home Member State shall require the
ARM to maintain adequate resources and have back-up facilities in place in
order to offer and maintain its services at all times.

4. The home
Member State shall require the ARM to have systems in place that can
effectively check transaction reports for completeness, identify omissions and
obvious errors and request re-transmission of any such erroneous reports.

5. The
Commission may adopt, by means of delegated acts in accordance with Article 34,
measures clarifying what
constitutes a reasonable commercial basis to report information as referred to
in paragraph 1.

ê 2004/39/EC

TITLE VIIV

COMPETENT AUTHORITIES

CHAPTER I

DESIGNATION, POWERS AND REDRESS PROCEDURES

Article 6948

Designation of competent
authorities

ê 2010/78/EU
Art. 6.17(a)

ð new

1. Each Member State shall designate the
competent authorities which are to carry out each of the duties provided for inð under the different provisions of Regulation (EU) No .../... (MiFIR) and of ïthis Directive. Member States shall inform the Commission, ESMA and
the competent authorities of other Member States of the identity of the
competent authorities responsible for enforcement of each of those duties, and
of any division of those duties.

ê 2004/39/EC
(adapted)

2. The competent authorities referred to in
paragraph 1 shall be public authorities, without prejudice to the
possibility of delegating tasks to other entities where that is expressly
provided for in Articles 5(5), 16(3), 17(2) and 23(4).

Any delegation of tasks to entities other
than the authorities referred to in paragraph 1 may not involve either the
exercise of public authority or the use of discretionary powers of judgement.
Member States shall require that, prior to delegation, competent authorities
take all reasonable steps to ensure that the entity to which tasks are to be
delegated has the capacity and resources to effectively execute all tasks and
that the delegation takes place only if a clearly defined and documented
framework for the exercise of any delegated tasks has been established stating
the tasks to be undertaken and the conditions under which they are to be
carried out. ThoseThese
conditions shall include a clause obliging the entity in question to act and be
organised in such a manner as to avoid conflict of interest and so that
information obtained from carrying out the delegated tasks is not used unfairly
or to prevent competition. In any case, Thethe
final responsibility for supervising compliance with this Directive and with
its implementing measures shall lie with the competent authority or authorities
designated in accordance with paragraph 1.

ê 2010/78/EU
Art. 6.17(b)

Member States shall inform the Commission,
ESMA and the competent authorities of other Member States of any arrangements
entered into with regard to delegation of tasks, including the precise conditions
regulating such delegation.

ê 2010/78/EU
Art. 6.17(c)

3. ESMA shall publish and keep up-to-date a
list of the competent authorities referred to in paragraphs 1 and 2
on its website.

ê 2004/39/EC
(adapted)

ð new

Article 7049

Cooperation between authorities in
the same Member State

If a Member State designates more than one
competent authority to enforce a provision of this Directive, their respective
roles shall be clearly defined and they shall cooperate closely.

Each Member State shall require that such
cooperation also take place between the competent authorities for the purposes
of this Directive and the competent authorities responsible in that Member
State for the supervision of credit and other financial institutions, pension
funds, UCITS, insurance and reinsurance intermediaries and insurance
undertakings.

Member States shall require that competent
authorities exchange any information which is essential or relevant to the
exercise of their functions and duties.

Article 7150

Powers to be made available to
competent authorities

1. Competent authorities shall be given all
supervisory and investigatory powers that are necessary for the exercise of
their functions. Within the limits provided for in their national legal
frameworks they shall exercise such powers:

(a)
directly; or

(b)
in collaboration with other authorities; or

(c)
under their responsibility by delegation to
entities to which tasks have been delegated according to Article 69(2)48(2); or

(d)
by application to the competent judicial
authorities.

2. The powers referred to in paragraph 1
shall be exercised in conformity with national law and shall include, at least,
the rights to:

(a)
have access to any document in any form
whatsoever Ö which
would be relevant for the performance of the supervisory duties Õ and to receive
a copy of it;

(b)
demand information from any person and if
necessary to summon and question a person with a view to obtaining information;

(c)
carry out on-site inspections;

(d)
 require existing telephone and existing data
traffic records ð held by investment firms where a
reasonable suspicion exists that such records related to the subject-matter of
the inspection may be relevant to prove a breach by the investment firm of its
obligations under this Directive; these records shall however not concern the
content of the communication to which they relate; ï

(e)      require the cessation of any practice that is
contrary to the provisions adopted in the implementation of this Directive;

(f)      request the freezing and/or the sequestration of
assets;

(e)(g) request
temporary prohibition of professional activity;

(f)(h)  require
authorised investment firms and regulated markets' auditors to provide
information;

(i)       adopt any type of measure to ensure that
investment firms and regulated markets continue to comply with legal
requirements;

(j)      require the suspension of trading in a financial
instrument;

(k)     require the removal of a financial instrument from
trading, whether on a regulated market or under other trading arrangements;

(g)(l)  refer matters for criminal prosecution;

(h)(m)            allow
auditors or experts to carry out verifications or investigations.

(i)       demand
information including all relevant documentation from any person regarding the
size and purpose of a position or exposure entered into via a derivative, and
any assets or liabilities in the underlying market.

3. If a request for records of telephone or
data traffic referred to in point (d) of paragraph 2 requires authorisation
from a judicial authority according to national rules.such authorisation shall
be applied for. Such authorisation may also be applied for as a precautionary
measure.

4. The processing
of personal data collected in the exercise of the supervisory and investigatory
powers pursuant to this Article shall be carried out in accordance with
Directive 95/46/EC.

ò new

Article 72

Remedies
to be made available to competent authorities

1. Competent
authorities shall be given all supervisory remedies that are necessary for the
exercise of their functions. Within the limits provided for in their national
legal frameworks they shall exercise such remedies:

(a)
require the cessation
of any practice or conduct that is contrary to the provisions of Regulation(EU) No .../... [MiFIR] and the provisions adopted in the
implementation of this Directive and to desist from a repetition of that
practice or conduct;

(b)
request the freezing
and/or the sequestration of assets;

(c)
adopt any type of
measure to ensure that investment firms and regulated markets continue to
comply with legal requirements;

(d)
require the suspension
of trading in a financial instrument;

(e)
require the removal of
a financial instrument from trading, whether on a regulated market or under
other trading arrangements;

(f)
request any person
that has provided information in accordance with Article 71(2) (i) to
subsequently take steps to reduce the size of the position or exposure;

(g)
limit the ability of
any person or class of persons from entering into a commodity derivative ,
including by introducing non-discriminatory limits on positions or the number
of such derivative contracts per underlying which any given class of persons
can enter into over a specified period of time, when necessary to ensure the
integrity and orderly functioning of the affected markets;

(h)
issue public notices.

ê 2004/39/EC

ð new

Article 7351

Administrative sanctions

1. Without prejudice
to the procedures for the withdrawal of authorisation or to the right of Member
States to impose criminal sanctions, Member
States shall ensure, in conformity with their national
law, that ð their competent authorities may ï take the appropriate administrative ð sanctions and ï measures can be taken or administrative
sanctions be imposed against the persons responsible where
the provisions ð of Regulation (EU) No .../... (MiFIR) or the national provisions ï adopted in the implementation of this Directive have not been
complied with. ð , and ï shall ensure that ð they are applied. ï Member States shall ensure that these measures are effective,
proportionate and dissuasive.

2. Member States
shall determine the sanctions to be applied for failure to cooperate in an
investigation covered by Article 50.

ò new

2. Member States
shall ensure that where obligations apply to investment firms and market
operators, in case of a breach, administrative sanctions and measures can be
applied to the members of the investment firms' and market operators'
management body, and any other natural or legal persons who, under national law,
are responsible for a violation.

ê 2004/39/EC

3. Member States shall
provide that the competent authority may disclose to the public any measure or
sanction that will be imposed for infringement of the provisions adopted in the
implementation of this Directive, unless such disclosure would seriously
jeopardise the financial markets or cause
disproportionate damage to the parties involved.

ê 2010/78/EU
Art. 6.18

34. Member States
shall provide ESMA annually with aggregated information about all
administrative measures and sanctions imposed in accordance with
paragraphs 1 and 2.

45. Where the
competent authority has disclosed an administrative measure or sanction to the
public, it shall, at the same timecontemporaneously,
report that fact to ESMA.

56. Where a
published sanction relates to an investment firm authorised in accordance with
this Directive, ESMA shall add a reference to the published sanction in the
register of investment firms established under Article 5(3).

ò new

Article 74

Publication
of sanctions

Member States
shall provide that the competent authority publishes any sanction or measure
that has been imposed for breaches of the provisions of Regulation (EU) No .../... (MiFIR) or of the national provisions adopted in
the implementation of this Directive without undue delay including information
on the type and nature of the breach and the identity of persons responsible
for it, unless such disclosure would seriously jeopardise the financial
markets. Where the publication would cause a disproportionate damage to the
parties involved, competent authorities shall publish the sanctions on an
anonymous basis.

Article 75

Breach of
authorisation requirement and other breaches

1. This Article shall apply to the following:

(a)          performing
investment services or activities as a regular occupation or business on a professional
basis without obtaining
authorisation in breach of Article 5;

(b)          acquiring,
directly or indirectly, a qualifying holding in an investment firm or further
increasing, directly or indirectly, such a qualifying holding in an investment
firm as a result of which the proportion of the voting rights or of the capital
held would reach or exceed 20 %, 30 % or 50 % or so that the investment firm
would become its subsidiary (hereinafter referred to as the proposed acquisition),
without notifying in writing the competent authorities of the investment firm
in which the acquirer is seeking to acquire or increase a qualifying holding in
breach of the first subparagraph of Article 11(1);

(c)          disposing,
directly or indirectly, of a qualifying holding in an investment firm or
reducing a qualifying holding so that the proportion of the voting rights or of
the capital held would fall below 20 %, 30 % or 50 % or so that the investment
firm would cease to be a subsidiary, without notifying in writing the competent
authorities, in breach of the second subparagraph of Article 11(1);

(d)          an investment
firm having obtained an authorisation through false statements or any other
irregular means in breach of Article 8(b);

(e)          an
investment firm failing to comply with requirements applicable to the
management body in accordance with Article 9(1);

(f)           the
management body of an investment firm failing to perform its duties in
accordance with Article 9(6);

(g)          an
investment firm, on becoming aware of any acquisitions or disposals of holdings
in their capital that cause holdings to exceed or fall below one of the
thresholds referred to in Article 11(1), failing to inform the competent
authorities of those acquisitions or disposals in breach of the first
subparagraph of Article 11(3);

(h)          an
investment firm failing to, at least once a year, inform the competent
authority of the names of shareholders and members possessing qualifying
holdings and the sizes of such holdings in breach of the second subparagraph of
Article 11(3);

(i)           an investment
firm failing to have in place an organisational requirement imposed in
accordance with the national provisions implementing Article 16 and 17;

(j)           an
investment firm failing to identify, prevent, manage and disclose conflicts of
interests in accordance with the national provisions implementing Article 23;

(k)          a MTF
or an OTF failing to establish rules, procedures and arrangements or failing to
comply with instructions in accordance with the national provisions
implementing Articles 18, 19 and 20;

(l)           an
investment firm repeatedly failing to provide information or reports to clients
and to comply with obligations on the assessment of suitability or
appropriateness in accordance with the national provisions implementing Articles
24 and 25;

(m)         an
investment firm accepting or receiving fees, commissions or any monetary
benefit in contravention of the national provisions implementing Article 19 (5)
and (6);

(n)          an
investment firm repeatedly failing to obtain the best possible result for
clients when executing orders and failing to establish arrangements in
accordance with national provisions implementing Article 27 and Article 28;

(o)          operating a regulated market without obtaining authorisation in breach
of Article 47;

(p)          the
management body of a market operator failing to perform its duties in
accordance with Article 48(6);

(q)          a
regulated market or a market operator failing to have in place arrangements,
systems, rules and procedures and to have available sufficient financial resources
in accordance with national provisions implementing Article 50;

(r)           a
regulated market or a market operator failing to have in place systems,
procedures, arrangements and rules or failing to grant access to data in
accordance with national rules implementing Article 51;

(s)          a
regulated market, a market operator or an investment firm repeatedly failing to
make public information in accordance with Articles 3, 5, 7 or 9 of Regulation (EU) No (EU) .../... [MiFIR];

(t)           an
investment firm repeatedly failing to make public information in accordance
with Articles 13, 17, 19 and 20 of Regulation (EU) No .../... [MiFIR];

(u)          an
investment firm repeatedly failing to report transactions to competent
authorities in accordance with Article 23 of Regulation (EU) No .../... [MiFIR];

(v)          a
financial counterparty and a non financial counterparty failing to trade
derivatives on trading venues in accordance with Article 24 of Regulation (EU) No .../... [MiFIR];

(w)         a
central counterparty failing to grant access to its clearing services in
accordance with Article 28 of Regulation (EU) No .../... [MiFIR];

(x)          a
regulated market, a market operator or an investment firm failing to grant
access to its trade feeds in accordance with Article 29 of Regulation (EU) No .../... [MiFIR];

(y)          a
person with proprietary rights to benchmarks failing to grant access to a
benchmark in accordance with Article 30 of Regulation (EU) No .../... [MiFIR];

(z)          an
investment firm marketing, distributing or selling financial instruments or
performing a type of financial activity or adopting a practice in contravention
of prohibitions or restrictions imposed based on Article 32 of Regulation (EU) No .../... [MiFIR].

2. Member States shall ensure that in the cases referred
to in paragraph 1, the administrative sanctions and measures that can be
applied include at least the following:

(a)          a
public statement, which indicates the natural or legal person and the nature of
the breach;

(b)          an
order requiring the natural or legal person to cease the conduct and to desist
from a repetition of that conduct;

(c)          in case
of an investment firm, withdrawal of the authorisation of the institution in
accordance with Article 8;

(d)          a
temporary ban against any member of the investment firm's management body or
any other natural person, who is held responsible, to exercise functions in
investment firms;

(e)          in case
of a legal person, administrative pecuniary sanctions of up to 10 % of the
total annual turnover of the legal person in the preceding business year; where
the legal person is a subsidiary of a parent undertaking, the relevant total
annual turnover shall be the total annual turnover resulting from the
consolidated account of the ultimate parent undertaking in the preceding
business year;

(f)           in
case of a natural person, administrative pecuniary sanctions of up to 5 000 000
EUR, or in the Member States where the Euro is not the official currency, the
corresponding value in the national currency on the date of entry into force of
this Directive;

(g)          administrative
pecuniary sanctions of up to twice the amount of the benefit derived from the
violation where that benefit can be determined.

Where the benefit derived from the violation can be
determined, Member States shall ensure that the maximum level is no lower than
twice the amount of that benefit.

Article 76

Effective
application of sanctions

1. Member States shall ensure that when determining
the type of administrative sanctions or measures and the level of
administrative pecuniary sanctions, the competent authorities shall take into
account all relevant circumstances, including:

a)           the
gravity and the duration of the breach;

b)           the
degree of responsibility of the responsible natural or legal person;

c)           the
financial strength of the responsible natural or legal person, as indicated by
the total turnover of the responsible legal person or the annual income of the
responsible natural person;

d)           the
importance of profits gained or losses avoided by the responsible natural or
legal person, insofar as they can be determined;

e)           the
losses for third parties caused by the breach, insofar as they can be
determined;

f)            the
level of cooperation of the responsible natural or legal person with the
competent authority;

g)           previous
violations by the responsible natural or legal person.

2. ESMA shall issue guidelines addressed to competent
authorities in accordance with Article 16 of Regulation No (EU) 1095/2010 on
types of administrative measures and sanctions and level of administrative
pecuniary sanctions.

Article 77

Reporting
of breaches

1. Member States
shall ensure that competent
authorities establish effective mechanisms to encourage reporting of breaches
of the provisions of Regulation .../... (MiFIR) and of national provisions
implementing this Directive to competent authorities.

Those
arrangements shall include at least:

(a)          specific
procedures for the receipt of reports and their follow-up;

(b)          appropriate
protection for employees of financial institutions who denounce breaches
committed within the financial institution;

(c)          protection
of personal data concerning both the person who reports the breaches and the
natural person who is allegedly responsible for a breach, in compliance with
the principles laid down in Directive 95/46/EC.

2. Member States
shall require financial institutions to have in place appropriate procedures
for their employees to report breaches internally trough a specific channel.

Article 78

Submitting
information to ESMA in relation to sanctions

1. Member States
shall provide ESMA annually with aggregated information regarding all administrative
measures or administrative sanctions imposed in accordance with Article 73.
ESMA shall publish this information in an annual report.

2. Where the
competent authority has disclosed an administrative measure or administrative sanction
to the public, it shall contemporaneously report that fact to ESMA. Where a
published administrative measure or administrative sanction relates to an
investment firm, ESMA shall add a reference to the published sanction in the
register of investment firms established under Article 5(3).

3. ESMA shall
develop draft implementing technical standards concerning the procedures and
forms for submitting information as referred to in this Article.

Power is
conferred on the Commission to adopt the implementing technical standards
referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

ESMA shall submit
those draft implementing technical standards to the Commission by [XX].

ê 2004/39/EC
(adapted)

ð new

Article 7952

Right of appeal

1. Member States shall ensure that any
decision taken ð under the provisions of Regulation (EU) No .../... (MiFIR)
or ï under laws, regulations or administrative provisions adopted in
accordance with this Directive is properly reasoned and is subject to the right
Ö of appeal
before a tribunal Õ to
apply to the courts. The right Ö of appeal
before a tribunal Õ to
apply to the courts shall also apply
where, in respect of an application for authorisation which provides all the
information required, no decision is taken within six months of its submission.

2. Member States shall provide that one or
more of the following bodies, as determined by national law, Ö also Õ may, in the
interests of consumers and in accordance with national law, take action before
the courts or competent administrative bodies to ensure that ð Regulation (EU) No .../... [MiFIR] and ï the national provisions for the implementation of this Directive
are applied:

(a)
public bodies or their representatives;

(b)
consumer organisations having a legitimate
interest in protecting consumers;

(c)
professional organisations having a legitimate
interest in acting to protect their members.

Article 8053

Extra-judicial mechanism for
investors' complaints

1. Member States shall encourage ð ensure ï the setting-up of efficient and effective complaints and redress
procedures for the out-of-court settlement of consumer disputes concerning the
provision of investment and ancillary services provided by investment firms,
using existing bodies where appropriate. ð Member States shall further ensure that all
investment firms adhere to one or more such bodies implementing such complaint
and redress procedures. ï

2. Member States shall ensure that those
bodies are not prevented by legal or regulatory
provisions from cooperating effectively in the resolution of cross-border
disputes ð actively cooperate with their
counterparts in other Member States in the resolution of cross-border disputes. ï

ê 2010/78/EU
Art. 6.19

3. The competent authorities shall notify
ESMA of the complaint and redress procedures referred to in paragraph 1
which are available under its jurisdictions.

ESMA shall publish and keep up-to-date a
list of all extra-judicial mechanisms on its website.

ê 2004/39/EC
(adapted)

ð new

Article 8154

Professional secrecy

1. Member States shall ensure that
competent authorities, all persons who work or who have worked for the
competent authorities or entities to whom tasks are delegated pursuant to
Article 69(2)48(2),
as well as auditors and experts instructed by the competent authorities, are
bound by the obligation of professional secrecy. Ö They
shall not divulge any Õ No
confidential information which they may receive in the course of their duties may be divulged to any
person or authority whatsoever, save
in summary or aggregate form such that individual investment firms, market
operators, regulated markets or any other person cannot be identified, without
prejudice to Ö requirements
of national Õ cases covered by
criminal law or the other provisions of this Directive.

2. Where an investment firm, market
operator or regulated market has been declared bankrupt or is being
compulsorily wound up, confidential information which does not concern third
parties may be divulged in civil or commercial proceedings if necessary for
carrying out the proceeding.

3. Without prejudice to Ö requirements
of national Õ cases covered by
criminal law, the competent authorities, bodies or natural or legal persons
other than competent authorities which receive confidential information
pursuant to this Directive may use it only in the performance of their duties
and for the exercise of their functions, in the case of the competent authorities,
within the scope of this Directive or, in the case of other authorities, bodies
or natural or legal persons, for the purpose for which such information was
provided to them and/or in the context of administrative or judicial
proceedings specifically related to the exercise of those functions. However,
where the competent authority or other authority, body or person communicating
information consents thereto, the authority receiving the information may use
it for other purposes.

4. Any confidential information received,
exchanged or transmitted pursuant to this Directive shall be subject to the
conditions of professional secrecy laid down in this Article. Nevertheless,
this Article shall not prevent the competent authorities from exchanging
or transmitting confidential information in accordance with this Directive and
with other Directives applicable to investment firms, credit institutions,
pension funds, UCITS, insurance and reinsurance intermediaries, insurance
undertakings regulated markets or market operators or otherwise with the
consent of the competent authority or other authority or body or natural or
legal person that communicated the information.

5. This Article shall not prevent the
competent authorities from exchanging or transmitting in accordance with
national law, confidential information that has not been received from a
competent authority of another Member State.

Article 8255

Relations with auditors

1. Member States shall provide, at least,
that any person authorised within the meaning of Eighth Council
Directive 84/253/EEC of 10 April 1984 on the approval of persons
responsible for carrying out the statutory audits of accounting documents[56],
performing in an investment firm the task described in Article 51 of
Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts
of certain types of companies[57], Article 37 of
Directive 83/349/EEC or Article 7331 of
Directive 85/611/EEC
Ö 2009/65/EC Õ or any other
task prescribed by law, shall have a duty to report promptly to the competent
authorities any fact or decision concerning that undertaking of which that
person has become aware while carrying out that task and which is liable to:

(a)
constitute a material breach of the laws,
regulations or administrative provisions which lay down the conditions
governing authorisation or which specifically govern pursuit of the activities
of investment firms;

(b)
affect the continuous functioning of the
investment firm;

(c)
lead to refusal to certify the accounts or to
the expression of reservations.

That person shall also have a duty to
report any facts and decisions of which the person becomes aware in the course
of carrying out one of the tasks referred to in the first subparagraph in an
undertaking having close links with the investment firm within which he is
carrying out that task.

2. The disclosure in good faith to the
competent authorities, by persons authorised within the meaning of
Directive 84/253/EEC, of any fact or decision referred to in
paragraph 1 shall not constitute a breach of any contractual or legal
restriction on disclosure of information and shall not involve such persons in
liability of any kind.

CHAPTER II

ê 2010/78/EU
Art. 6.20

COOPERATION BETWEEN THE COMPETENT AUTHORITIES OF THE
MEMBER STATES AND WITH ESMA

ê 2004/39/EC

Article 8356

Obligation to cooperate

1. Competent authorities of different
Member States shall cooperate with each other whenever necessary for the
purpose of carrying out their duties under this Directive, making use of their
powers whether set out in this Directive or in national law.

Competent authorities shall render
assistance to competent authorities of the other Member States. In particular,
they shall exchange information and cooperate in any investigation or
supervisory activities.

ê 2010/78/EU
Art. 6.21(a)

In order to facilitate and accelerate
cooperation, and more particularly exchange of information, Member States shall
designate a single competent authority as a contact point for the purposes of
this Directive. Member States shall communicate to the Commission, ESMA and to
the other Member States the names of the authorities which are designated to
receive requests for exchange of information or cooperation pursuant to this
paragraph. ESMA shall publish and keep up-to-date a list of those authorities
on its website.

ê 2004/39/EC

ð new

2. When, taking into account the situation
of the securities markets in the host Member State, the operations of a
regulated market ð an MTF, or an OTF ï that has established arrangements in a host Member State have
become of substantial importance for the functioning of the securities markets
and the protection of the investors in that host Member State, the home and
host competent authorities of the regulated market shall establish
proportionate cooperation arrangements.

3. Member States shall take the necessary
administrative and organisational measures to facilitate the assistance
provided for in paragraph 1.

Competent authorities may use their powers
for the purpose of cooperation, even in cases where the conduct under
investigation does not constitute an infringement of any regulation in force in
that Member State.

ê 2010/78/EU
Art. 6.21(b)

4. Where a competent authority has good
reasons to suspect that acts contrary to the provisions of this Directive,
carried out by entities not subject to its supervision, are being or have been
carried out on the territory of another Member State, it shall notify the
competent authority of the other Member State and ESMA in as specific a manner
as possible. The notified competent authority shall take appropriate action. It
shall inform the notifying competent authority and ESMA of the outcome of the
action and, to the extent possible, of significant interim developments. This
paragraph shall be without prejudice to the competence of the notifying
competent authority.

ò new

5. Without
prejudice to paragraphs 1 and 4, competent authorities shall notify ESMA and
other competent authorities of the details of:

(a)
any requests to reduce
the size of a position or exposure pursuant to Article 72(1) (f);

(b)
any limits on the
ability of persons to enter into an instrument pursuant to Article 72(1)(g).

The notification
shall include, where relevant, the details of the request pursuant to Article 72(1)(f)
including the identity of the person or persons to whom it was addressed and
the reasons thereof, as well as the scope of the limits introduced pursuant to
Article 72(1)(g) including the person or class of persons concerned, the
applicable financial instruments, any quantitative measures or thresholds such
as the maximum number of contracts persons can enter into before a limit is
reached, any exemptions thereto, and the reasons thereof.

The notifications
shall be made not less than 24 hours before the actions or measures are
intended to take effect. In exceptional circumstances, a competent authority
may make the notification less than 24 hours before the measure is intended to
take effect where it is not possible to give 24 hours notice.

A competent
authority of a Member State that receives notification under this paragraph may
take measures in accordance with Article 72(1)(f) or (g) where it is satisfied
that the measure is necessary to achieve the objective of the other competent
authority. The competent authority shall also give notice in accordance with
this paragraph where it proposes to take measures.

When an action
under (a) or (b) relates to wholesale energy products, the competent authority
shall also notify the Agency for the Cooperation of Energy Regulators
established under Regulation (EC) No 713/2009.

6. In relation to
emission allowances, competent authorities should cooperate with public bodies
competent for the oversight of spot and auction markets and competent
authorities, registry administrators and other public bodies charged with the
supervision of compliance under Directive 2003/87/EC in order to ensure that
they can acquire a consolidated overview of emission allowances markets.

ê 2004/39/EC

è1 2008/10/EC Art. 1.18(a)

è2 2008/10/EC Art. 1.18(b)

ð new

75. In
order to ensure the uniform application of paragraph 2 the Commission
may adoptè1 --- ç implementing ð The Commission shall be empowered to adopt delegated
acts in accordance with Article 94 concerning ï measures to establish the criteria under which the operations of a
regulated market in a host Member State could be considered as of substantial
importance for the functioning of the securities markets and the protection of
the investors in that host Member State. è2 Those measures,
designed to amend non-essential elements of this Directive by supplementing
it, shall be adopted in accordance with the regulatory procedure with scrutiny
referred to in Article 64(2). ç

ê 2010/78/EU
Art. 6.21(c) (adapted)

ð new

76. In order to ensure
uniform conditions of application of this Article, ESMA may ð shall ï develop draft implementing technical standards to establish
standard forms, templates and procedures for the cooperation arrangements
referred to in paragraph 2.

ð ESMA shall submit those draft
implementing technical standards to the Commission by [31 December 2016]. ï

Power is conferred on the Commission to
adopt the implementing technical standards referred to in the first
subparagraph in accordance with Article 15 of Regulation (EU) No
1095/2010.

ê 2004/39/EC
(adapted)

è1 2010/78/EU
Art. 6.22(a)

Article 8457

è1 1. ç A competent
authority of one Member State may request the cooperation of the competent
authority of another Member State in a supervisory activity or for an
on-the-spot verification or in an investigation. In the case of investment
firms that are remote members of a regulated market the competent authority of
the regulated market may choose to address them directly, in which case it
shall inform the competent authority of the home Member State of the remote
member accordingly.

Where a competent authority receives a
request with respect to an on-the-spot verification or an investigation, it
shall, within the framework of its powers:

(a)
carry out the verifications or
investigations itself; or

(b)
allow the requesting authority to carry out the
verification or investigation; or

(c)
allow auditors or experts to carry out the
verification or investigation.

ê 2010/78/EU
Art. 6.22(b) (adapted)

ð new

2. With the objective of converging
supervisory practices, ESMA shall be able to participate in the activities of
the colleges of supervisors, including on-site verifications or investigations,
carried out jointly by two or more competent authorities in accordance with
Article 21 of Regulation (EU) No 1095/2010.

3. In order to ensure consistent application of paragraph 1,
ESMA may ð shall ï develop draft regulatory technical standards to specify the
information to be exchanged between competent authorities when cooperating in
supervisory activities, on-the-spot-verifications, and investigations.

ð ESMA shall submit those draft
regulatory technical standards to the Commission by [31 December 2016]. ï

Power is delegated to the Commission to
adopt the regulatory technical standards referred to in the first subparagraph
in accordance with the procedure laid down in Articles 10 to 14 of
Regulation. (EU) No 1095/2010.

In order to ensure uniform conditions of
application of paragraph 1, ð 4. ï ESMA may ð shall ï develop draft implementing technical standards to establish
standard forms, templates and procedures for competent authorities to cooperate
in supervisory activities, on-site verifications, and investigations.

ð ESMA shall submit those draft
implementing technical standards to the Commission by [31 December 2016]. ï

Power is conferred on the Commission to
adopt the implementing technical standards referred to in the firstthird subparagraph
in accordance with Article 15 of Regulation (EU) No 1095/2010.

ê 2004/39/EC
(adapted)

Article 8558

Exchange of information

1. Competent authorities of Member States
having been designated as contact points for the purposes of this Directive in
accordance with Article 83(1)56(1)
shall immediately supply one another with the information required for the
purposes of carrying out the duties of the competent authorities, designated in
accordance to Article 69(1)48(1),
set out in the provisions adopted pursuant to this Directive.

Competent authorities exchanging information
with other competent authorities under this Directive may indicate at the time
of communication that such information must not be disclosed without their
express agreement, in which case such information may be exchanged solely for
the purposes for which those authorities gave their agreement.

2. The competent authority having been
designated as the contact point may transmit the information received under
paragraph 1 and Articles 8255
and 9263
to the authorities referred to in Article 7449.
They shall not transmit it to other bodies or natural or legal persons without
the express agreement of the competent authorities which disclosed it and
solely for the purposes for which those authorities gave their agreement,
except in duly justified circumstances. In this last case, the contact point
shall immediately inform the contact point that sent the information.

3. Authorities as referred to in Article 7449 as well as
other bodies or natural and legal persons receiving confidential information
under paragraph 1 of this Article or under Articles 8255 and 9263 may use it only
in the course of their duties, in particular:

(a)
to check that the conditions governing the
taking-up of the business of investment firms are met and to facilitate the
monitoring, on a non-consolidated or consolidated basis, of the conduct of that
business, especially with regard to the capital adequacy requirements imposed
by Directive 93/6/EEC, administrative and accounting procedures and
internal-control mechanisms;

(b)
to monitor the proper functioning of trading
venues;

(c)
to impose sanctions;

(d)
in administrative appeals against decisions by
the competent authorities;

(e)
in court proceedings initiated under
Article 7952;
or

(f)
in the extra-judicial mechanism for investors'
complaints provided for in Article 8053.

ê 2010/78/EU Art.
6.23(a) (adapted)

ð new

4. In order to ensure uniform conditions of
application of paragraphs 1 and 2, ESMA may ð shall ï develop draft implementing technical standards to establish
standard forms, templates and procedures for the exchange of information.

ð ESMA shall submit those draft
implementing technical standards to the Commission by [31 December 2016]. ï

Power is conferred on the Commission to
adopt the implementing technical standards referred to in the first
subparagraph in accordance with Article 15 of Regulation (EU) No
1095/2010.

ê 2010/78/EU
Art. 6.23(b)

5. Neither this Article nor Articles 8154 or 9263 shall prevent a
competent authority from transmitting to ESMA, the European Systemic Risk Board
(hereinafter the ‘ESRB’), central banks, the European System of Central Banks
and the European Central Bank, in their capacity as monetary authorities, and,
where appropriate, to other public authorities responsible for overseeing
payment and settlement systems, confidential information intended for the
performance of their tasks; likewise such authorities or bodies shall not be
prevented from communicating to the competent authorities such information as
they may need for the purpose of performing their functions provided for in
this Directive.

ê 2010/78/EU Art. 6.24 (adapted)

Article 86

Binding mediation

Ö 1. Õ The competent
authorities may refer to ESMA situations where a request relating to one of the
following has been rejected or has not been acted upon within a reasonable
time:

(a)
to carry out a supervisory activity, an
on-the-spot verification, or an investigation, as provided for in Article 8457; or

(b)
to exchange information as provided for in
Article 8558.

Ö 2. Õ In the
situations referred to in the first
paragraph Ö 1 Õ , ESMA may act
in accordance with Article 19 of Regulation (EU) No 1095/2010, without
prejudice to the possibilities for refusing to act on a request for information
foreseen in Article 8759a
and to the possibility of ESMA acting in accordance with Article 17 of
Regulation (EU) No 1095/2010.

ê 2004/39/EC

Article 8759

Refusal to cooperate

A competent authority may refuse to act on
a request for cooperation in carrying out an investigation, on-the-spot
verification or supervisory activity as provided for in Article 8857 or to exchange
information as provided for in Article 8558
only where:

(a)     such an investigation, on-the-spot verification,
supervisory activity or exchange of information might adversely affect the
sovereignty, security or public policy of the State addressed;

(ab)   judicial
proceedings have already been initiated in respect of the same actions and the
same persons before the authorities of the Member State addressed;

(bc)   final
judgment has already been delivered in the Member State addressed in respect of
the same persons and the same actions.

ê 2010/78/EU
Art. 6.25

In the case of such a refusal, the
competent authority shall notify the requesting competent authority and ESMA
accordingly, providing as detailed information as possible.

ê 2004/39/EC
(adapted)

Article 8860

Inter-authority Cconsultation
prior to authorisation

1. The competent authorities of the other
Member State involved shall be consulted prior to granting authorisation to an
investment firm which is Ö one of
the following Õ :

(a)
a subsidiary of an investment firm or credit
institution authorised in another Member State; or

(b)
a subsidiary of the parent undertaking of an
investment firm or credit institution authorised in another Member State; or

(c)
controlled by the same natural or legal persons
as control an investment firm or credit institution authorised in another
Member State.

2. The competent authority of the Member
State responsible for the supervision of credit institutions or insurance
undertakings shall be consulted prior to granting an authorisation to an
investment firm which is:

(a)
a subsidiary of a credit institution or
insurance undertaking authorised in the Community Ö Union Õ ; or

(b)
a subsidiary of the parent undertaking of a
credit institution or insurance undertaking authorised in the Community
Ö Union Õ ; or

(c)
controlled by the same person, whether natural
or legal, who controls a credit institution or insurance undertaking authorised
in the Community
Ö Union Õ .

3. The relevant competent authorities
referred to in paragraphs 1 and 2 shall in particular consult each other
when assessing the suitability of the shareholders or members and the
reputation and experience of persons who effectively direct the business
involved in the management of another entity of the same group. They shall
exchange all information regarding the suitability of shareholders or members
and the reputation and experience of persons who effectively direct the business
that is of relevance to the other competent authorities involved, for the
granting of an authorisation as well as for the ongoing assessment of
compliance with operating conditions.

ê 2010/78/EU
Art. 6.26 (adapted)

ð new

4. In order to ensure uniform conditions of
application of paragraphs 1 and 2, ESMA may ð shall ï develop draft implementing technical standards to establish
standard forms, templates and procedures for the consultation of other competent
authorities prior to granting an authorisation.

ð ESMA shall submit those draft
implementing technical standards to the Commission by [31 December 2016]. ï

Power is conferred on the Commission to
adopt the implementing technical standards referred to in the first
subparagraph in accordance with Article 15 of Regulation (EU) No
1095/2010.

ê 2004/39/EC

ð new

Article 8961

Powers for host Member States

1. Host Member States ð shall provide that the competent authority ï may, for statistical purposes, require all
investment firms with branches within their territories to report to them
periodically on the activities of those branches.

2. In discharging their responsibilities
under this Directive, host Member States ð shall provide that the competent authority ï may require branches of investment firms to
provide the information necessary for the monitoring of their compliance with
the standards set by the host Member State that apply to them for the cases
provided for in Article 37(8)32(7).
Those requirements may not be more stringent than those which the same Member
State imposes on established firms for the monitoring of their compliance with
the same standards.

Article 9062

Precautionary measures to be taken
by host Member States

1. Where the competent authority of the
host Member State has clear and demonstrable grounds for believing that an
investment firm acting within its territory under the freedom to provide
services is in breach of the obligations arising from the provisions adopted
pursuant to this Directive or that an investment firm that has a branch within
its territory is in breach of the obligations arising from the provisions adopted
pursuant to this Directive which do not confer powers on the competent
authority of the host Member State, it shall refer those findings to the
competent authority of the home Member State.

ê 2010/78/EU
Art. 6.27(a)

If, despite the measures taken by the
competent authority of the home Member State or because such measures prove
inadequate, the investment firm persists in acting in a manner that is clearly
prejudicial to the interests of host Member State investors or the orderly
functioning of markets, the following shall apply:

(a)
after informing the competent authority of the
home Member State, the competent authority of the host Member State shall take
all the appropriate measures needed in order to protect investors and the
proper functioning of the markets, which shall include the possibility of
preventing offending investment firms from initiating any further transactions
within their territories. The Commission and ESMA shall be informed of such
measures without delay;

(b)
in addition, the competent authority of the host
Member State may refer the matter to ESMA, which may act in accordance with the
powers conferred on it under Article 19 of Regulation (EU) No 1095/2010.

ê 2004/39/EC

2. Where the competent authorities of a host
Member State ascertain that an investment firm that has a branch within its
territory is in breach of the legal or regulatory provisions adopted in that
State pursuant to those provisions of this Directive which confer powers on the
host Member State's competent authorities, those authorities shall require the
investment firm concerned to put an end to its irregular situation.

If the investment firm concerned fails to
take the necessary steps, the competent authorities of the host Member State
shall take all appropriate measures to ensure that the investment firm
concerned puts an end to its irregular situation. The nature of those measures
shall be communicated to the competent authorities of the home Member State.

ê 2010/78/EU
Art. 6.27(b) (adapted)

WhereIf, despite the
measures taken by the host Member State, the investment firm persists in
breaching the legal or regulatory provisions referred to in the first
subparagraph in force in the host Member State, the following shall apply: Ö competent
authority of the host Member State shall, Õ (a)
after informing the competent authority of the home Member State, the competent authority
of the host Member State shall take all the appropriate
measures needed in order to protect investors and the proper functioning of the
markets. The Commission and ESMA shall be informed of such measures without
delay.;

In (b) in addition,
the competent authority of the host Member State may refer the matter to ESMA,
which may act in accordance with the powers conferred on it under
Article 19 of Regulation (EU) No 1095/2010.

ê 2004/39/EC

ð new

3. Where the competent authority of the
host Member State of a regulated market,
or
an MTF ð or OTF ï has clear and demonstrable grounds for believing that such
regulated market, or
MTF ð or OTF ï is in breach of the obligations arising from the provisions adopted
pursuant to this Directive, it shall refer those findings to the competent
authority of the home Member State of the regulated market or the MTF ð or OTF ï .

ê 2010/78/EU
Art. 6.27(c) (adapted)

WhereIf, despite the
measures taken by the competent authority of the home Member State or because
such measures prove inadequate, that regulated market or the MTF persists in
acting in a manner that is clearly prejudicial to the interests of host Member
State investors or the orderly functioning of markets, the following shall apply:
Ö the
competent authority of the host Member State shall, Õ (a)
after informing the competent authority of the home Member State, the competent authority
of the host Member State shall take all the appropriate
measures needed in order to protect investors and the proper functioning of the
markets, which shall include the possibility of preventing that regulated
market or the MTF from making their arrangements available to remote members or
participants established in the host Member State. The Commission and ESMA
shall be informed of such measures without delay.;

In (b) in addition,
the competent authority of the host Member State may refer the matter to ESMA,
which may act in accordance with the powers conferred on it under
Article 19 of Regulation (EU) No 1095/2010.

ê 2004/39/EC

4. Any measure adopted pursuant to
paragraphs 1, 2 or 3 involving sanctions or restrictions on the activities
of an investment firm or of a regulated market shall be properly justified and
communicated to the investment firm or to the regulated market concerned.

ê 2010/78/EU
Art. 6.28

Article 9162a

Cooperation and exchange of
information with ESMA

1. The competent authorities shall
cooperate with ESMA for the purposes of this Directive, in accordance with
Regulation (EU) No 1095/2010.

2. The competent authorities shall, without
delay, provide ESMA with all information necessary to carry out its duties
under this Directive and in accordance with Article 35 of Regulation (EU)
No 1095/2010.

ê 2004/39/EC

CHAPTER III

COOPERATION WITH THIRD COUNTRIES

Article 9263

Exchange of information with third
countries

ê 2010/78/EU
Art. 6.29 (adapted)

ð new

1. Member States and in accordance with
Article 33 of Regulation (EU) No 1095/2010, ESMA Ö , Õ may conclude
cooperation agreements providing for the exchange of information with the
competent authorities of third countries only if the information disclosed is
subject to guarantees of professional secrecy at least equivalent to those
required under Article 8154.
Such exchange of information must be intended for the performance of the tasks
of those competent authorities.

Member States and
ESMA may transfer ð Transfer ï personal data to a third country ð by a Member State shall be ï in accordance with Chapter IV of Directive 95/46/EC.

ð Transfers of personal data to a
thrid country by ESMA shall be in accordance with Article 9 of Regulation (EU)
No 45/2001. ï

Member States and ESMA may also conclude
cooperation agreements providing for the exchange of information with third
country authorities, bodies and natural or legal persons responsible for one or
more of the following:

(a)
the supervision of credit institutions, other
financial institutions, insurance undertakings and the supervision of financial
markets;

(b)
the liquidation and bankruptcy of investment
firms and other similar procedures;

(c)
the carrying out of statutory audits of the
accounts of investment firms and other financial institutions, credit
institutions and insurance undertakings, in the performance of their
supervisory functions, or which administer compensation schemes, in the performance
of their functions;

(d)
oversight of the bodies involved in the
liquidation and bankruptcy of investment firms and other similar procedures;

(e)
oversight of persons charged with
carrying out statutory audits of the accounts of insurance undertakings, credit
institutions, investment firms and other financial institutions;.

(f)
oversight of persons active on emission
allowances markets for the purpose of ensuring a consolidated overview of
financial and spot markets.

The cooperation agreements referred to in the
third subparagraph may be concluded only where the information disclosed is
subject to guarantees of professional secrecy at least equivalent to those
required under Article 8154.
Such exchange of information shall be intended for the performance of the tasks
of those authorities or bodies or natural or legal persons. ð Where a cooperatioon agreement
involves the transfer of personal data by a Member State, it shall comply with
Chapter IV of Directive 95/46/EC and with Regulation (EC) N° 45/2001 in the
case ESMA is involved in the transfer. ï

ê 2004/39/EC

2. Where the information originates in
another Member State, it may not be disclosed without the express agreement of
the competent authorities which have transmitted it and, where appropriate,
solely for the purposes for which those authorities gave their agreement. The
same provision applies to information provided by third country competent
authorities.

TITLE VIIV

ò new

CHAPTER 1

DELEGATED ACTS

Article 93

Delegated
acts

The Commission shall be empowered to
adopt delegated acts in accordance with Article 94 concerning Articles 2(3), 4(1),
4(2), 13(1), 16(12), 17(6), 23(3), 24(8), 25(6), 27(7), 28(3), 30(5), 32(3), 35(8),
44(4), 51(7), 52(6), 53(4), 59(3), 60(5) , 66(6), 66(7), 67(3), 67(7), 67(8), 68(5),
83(7) and 99(2).

Article 94

Exercise
of the delegation

1.
The power to adopt delegated acts is
conferred on the Commission subject to the conditions laid down in this
Article.

2.
The delegation of power referred to in Article 93
shall be conferred for an indeterminate period of time from the date of entry
into force of this Directive.

3.
The delegation of powers referred to
in Article 93 may be revoked at any time by the European Parliament or by the
Council. A decision of revocation shall put an end to the delegation of the
power specified in that decision. It shall take effect the day following the
publication of the decision in the Official Journal of the European Union or at
a later date specified therein. It shall not affect the validity of any
delegated acts already in force.

4.
As soon as it adopts a delegated act,
the Commission shall notify it simultaneously to the European Parliament and to
the Council.

5.
A delegated act adopted pursuant to Article
93 shall enter into force only if no objection has been expressed either by the
European Parliament or the Council within a period of 2 months of notification
of that act to the European Parliament and the Council or if, before the expiry
of that period, the European Parliament and the Council have both informed the
Commission that they will not object. That period shall be extended by 2 months
at the initiative of the European Parliament or the Council.

CHAPTER 2

Implementing Acts

Article 95

Committee
procedure

1. For the
adoption of implementing acts under Article 41 and 60, the Commission shall be
assisted by the European Securities Committee established by Commission
Decision 2001/528/EC[58]. That committee shall be
a committee within the meaning of Regulation (EU) No 182/2011[59].

2. Where
reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011
shall apply, having regard to the provisions of Article 8 thereof.

CHAPTER 3

ê 2004/39/EC

FINAL PROVISIONS

Article 64

Committee procedure

1. The Commission
shall be assisted by the European Securities Committee established by
Commission Decision 2001/528/EC[60] (hereinafter referred to as ‘the Committee’).

ê 2008/10/EC
Art. 1.20(a)

2. Where reference
is made to this paragraph, Article 5a(1) to (4) and Article 7 of Decision
1999/468/EC shall apply, having regard to the provisions of Article 8 thereof.

ê 2006/31/EC
Art. 1.2(a)

2a. None of the
implementing measures enacted may change the essential provisions of this
Directive.

ê 2008/10/EC
Art. 1.20(b)

3. Where reference
is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall
apply, having regard to the provisions of Article 8 thereof.

The period laid
down in Article 5(6) of Decision 1999/468/EC shall be set at three months.

ê 2008/10/EC
Art. 1.20(c)

4. By 31 December
2010, and, thereafter, at least every three years, the Commission shall review
the provisions concerning its implementing powers and present a report to the
European Parliament and to the Council on the functioning of those powers. The
report shall examine, in particular, the need for the Commission to propose
amendments to this Directive in order to ensure the appropriate scope of the
implementing powers conferred on the
Commission. The conclusion as to whether or not amendment is necessary shall be
accompanied by a detailed statement of reasons. If necessary, the report shall
be accompanied by a legislative proposal to amend the provisions conferring implementing
powers on the Commission.

ê 2010/78/EU
Art. 6.30

Article 64a

Sunset clause

By 1 December
2011 the Commission shall review Articles 2, 4, 10b, 13, 15, 18, 19, 21,
22, 24 and 25, Articles 27 to 30, and Articles 40, 44, 45,
56 and 58 and present any appropriate legislative proposal in order to
allow the full application of the delegated acts under Article 290 TFEU
and implementing acts under Article 291 TFEU in respect of this Directive.
Without prejudice to implementing measures already adopted, the powers conferred on the Commission in Article 64 to
adopt implementing measures that remain after the entry into force of the
Lisbon Treaty on 1 December 2009 shall cease to apply on 1 December
2012.

ê 2006/31/EC
Art. 1.3

Article 9665

Reports and review

1. By 31 October
2007, the Commission shall, on the basis of public consultation and in the
light of discussions with competent authorities, report to the European
Parliament and to the Council on the possible extension of the scope of the
provisions of this Directive concerning pre and post-trade transparency
obligations to transactions in classes of financial instruments other than
shares.

2. By 31 October
2008, the Commission shall present the European Parliament and the Council
with a report on the application of Article 27.

3. By 30 April
2008, the Commission shall, on the basis of public consultations and in the
light of discussions with competent authorities, report to the European
Parliament and to the Council on:

(a) the continued
appropriateness of the exemption provided for in Article 2(1)(k) for
undertakings whose main business is dealing on own account in commodity
derivatives;

(b) the content
and form of proportionate requirements for the authorisation and supervision of
such undertakings as investment firms within the meaning of this Directive;

(c) the
appropriateness of rules concerning the appointment of tied agents in
performing investment services and/or activities, in particular with respect to
the supervision of them;

(d) the continued
appropriateness of the exemption provided for in Article 2(1)(i).

4. By 30 April
2008, the Commission shall present the European Parliament and the Council with
a report on the state of the removal of the obstacles which may prevent the
consolidation at European level of the information that trading venues are
required to publish.

5. On the basis of
the reports referred to in paragraphs 1 to 4, the Commission may submit
proposals for related amendments to this Directive.

6. By 31 October
2006, the Commission shall, in the light of discussions with competent
authorities, report to the European Parliament and to the Council on the
continued appropriateness of the requirements for professional indemnity
insurance imposed on intermediaries under
Community law.

ò new

1. Before [2
years following application of MiFID as specified in Article 97] the
Commission after consulting ESMA shall present a report to the European
Parliament and the Council on:

(a)
the functioning of
organised trading facilities, taking into account supervisory experiences
acquired by competent authorities, the number of OTFs authorised in the EU and
their market share;

(b)
the functioning of the
regime for SME growth markets, taking into account the number of MTFs
registered as SME growth markets, numbers of issuers present on these, and relevant
trading volumes;

(c)
the impact of
requirements regarding automated and high-frequency trading;

(d)
the experience with
the mechanism for banning certain products or practices, taking into account
the number of times the mechanisms have been triggered and their effects;

(e)
the impact of the
application or limits or
alternative arrangements on liquidity, market abuse and orderly pricing and
settlement conditions in commodity
derivatives markets;

(f)
the functioning of the
consolidated tape established in accordance with Title V, in particular the
availability of post-trade information of a high quality in a consolidated
format capturing the entire market in accordance with user-friendly standards
at a reasonable cost. In order to ensure the quality and the accessibility of
consolidated post-trade information, the Commission shall submit its report
accompanied, if appropriate, by a legislative proposal for the establishment of
a single entity operating a consolidated tape

ê 2004/39/EC

è1 Corrigendum,
OJ L 045, 16.2.2005, p. 18

Article 66

Amendment of
Directive 85/611/EEC

In Article 5
of Directive 85/611/EEC, paragraph 4 shall be replaced by the
following:

‘4. Articles
2(2), 12, 13 and 19 of è1 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments
ç[61], shall apply to the provision of the services
referred to in paragraph 3 of this Article by management companies’».

Article 67

Amendment of
Directive 93/6/EEC

Directive 93/6/EEC
shall be amended as follows:

1)
Article 2(2) shall be replaced by the following:

‘2.
Investment firms shall mean all institutions that satisfy the definition in
Article 4(1) of è1 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments
ç [62],which are subject to the requirements imposed
by the same Directive, excluding:

(a)
credit institutions,

(b)
local firms as defined in 20, and

(c)
firms which are only authorised to provide the service of investment advice
and/or receive and transmit orders from investors without in both cases holding
money or securities belonging to their clients and which for that reason may
not at any time place themselves in debit with their clients.’»

2)
Article 3(4) shall be replaced by the following:

‘4.
The firms referred to in point (b) of Article 2(2) shall have initial capital
of EUR 50000 in so far as they benefit from the freedom of establishment or
to provide services under Articles 31 or 32 of Directive 2004/39/EC.’»;

3)
In Article 3 the following paragraphs shall be inserted:

‘(4a)
Pending revision of Directive 93/6/EC, the firms referred to in point (c) of
Article 2(2) shall have:

(a)
initial capital of EUR 50000; or

(b)
professional indemnity insurance covering the whole territory of the Community
or some other comparable guarantee against liability arising from professional
negligence, representing at least EUR 1000000 applying to each claim and in
aggregate EUR 1500000 per year for all claims; or

(c) a
combination of initial capital and professional indemnity insurance in a form
resulting in a level of coverage equivalent to points (a) or (b).

The
amounts referred to in this paragraph shall be periodically reviewed by the
Commission in order to take account of changes in the European Index of
Consumer Prices as published by Eurostat, in line with and at the same time as
the adjustments made under Article 4(7) of Directive 2002/92/EC of the European
Parliament and the Council of 9 December 2002 on insurance mediation[63].

(4b)
When an investment firm referred to in Article 2(2)(c), is also registered
under Directive 2002/92/EC it has to comply with the requirement established
by Article 4(3), of that Directive and in addition it has to have:

(a)
initial capital of EUR 25000; or

(b)
professional indemnity insurance covering the whole territory of the Community
or some other comparable guarantee against liability arising from
professional negligence, representing at least EUR 500000 applying to each
claim and in aggregate EUR 750000 per year for all claims; or

(c) a
combination of initial capital and professional indemnity insurance in a
form resulting in a level of coverage equivalent to points (a) or (b).’»

Article 68

Amendment of
Directive 2000/12/EC

Annex I of
Directive 2000/12/EC shall be amended as follows:

At the end of the
Annex I the following sentence is added:

‘The services
and activities provided for in Section A and B of Annex I of è1 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments
ç[64]
when referring to the financial instruments
provided for in Section C of Annex I of that Directive are subject to mutual
recognition according to this Directive.’»

ê 2006/31/EC
Art. 1.4

Article 69

Repeal of
Directive 93/22/EEC

Directive 93/22/EEC
shall be repealed with effect from 1 November 2007. References to
Directive 93/22/EEC shall be construed as references to this Directive.
References to terms defined in, or Articles of, Directive 93/22/EEC shall
be construed as references to the equivalent term defined in, or Article of, this Directive.

ê 2004/39/EC

Article 9770

Transposition

ò new

1. Member States
shall adopt and publish, by [....] at the latest, the laws, regulations and
administrative provisions necessary to comply with this Directive. They shall
forthwith communicate to the Commission the text of those provisions and a
correlation table between those provisions and this Directive.

When Member
States adopt those provisions, they shall contain a reference to this directive
or be accompanied by such a reference on the occasion of their official
publication. Member States shall determine how such reference is to be made.
They shall also include a statement that references in existing laws,
regulations and administrative provisions to the directives repealed by this
directive shall be construed as references to this Directive. Member States
shall determine how such reference is to be made and how that statement is to
be formulated.

Members States
shall apply these measures from [...] except for the provisions transposing Article
67(2) which shall apply from [2 years after the application date for the
rest of the Directive].

2. Member States
shall communicate to the Commission and ESMA the text of the main provisions of
national law which they adopt in the field covered by this Directive.

ê 2006/31/EC
Art. 1.5

Member States
shall adopt the laws, regulations and administrative provisions necessary to
comply with this Directive by 31 January 2007. They shall forthwith inform
the Commission thereof.

They shall apply
these measures from 1 November 2007.

ê 2004/39/EC

When Member States
adopt these measures, they shall contain a reference to this Directive or shall
be accompanied by such reference on the occasion of their official
publication. The methods of making such reference shall be laid down by the
Member States.

Article 71

Transitional
provisions

ê 2006/31/EC
Art. 1.6

1. Investment
firms already authorised in their home Member State to provide investment
services before 1 November 2007 shall be deemed to be so authorised for
the purposes of this Directive if the laws of that Member State provide that to
take up such activities they must comply with conditions comparable to those
provided for in Articles 9 to 14.

2. A regulated
market or a market operator already authorised in its home Member State before
1 November 2007 shall be deemed to be so authorised for the purposes of
this Directive if the laws of that Member State provide that the regulated market
or market operator, as the case may be, must comply with conditions comparable
to those provided for in Title III.

3. Tied agents
already entered in a public register before 1 November 2007 shall be
deemed to be so registered for the purposes of this Directive if the laws of
Member States concerned provide that tied agents must comply with conditions
comparable to those provided for in Article 23.

4. Information
communicated before 1 November 2007 for the purposes of Articles 17,
18 or 30 of Directive 93/22/EEC shall be deemed to have been
communicated for the purposes of Articles 31 and 32 of this Directive.

5. Any existing
system falling under the definition of an MTF operated by a market operator of
a regulated market shall, at the request of the market operator of the
regulated market, be authorised as an MTF, provided that it complies with rules
equivalent to those required by this Directive for the authorisation and
operation of MTFs and that the request concerned is made within eighteen months
following 1 November 2007.

ê 2004/39/EC

6. Investment
firms shall be authorised to continue considering existing professional clients
as such provided that this categorisation has been granted by the
investment firm on the basis of an adequate assessment of the expertise,
experience and knowledge of the client which gives reasonable assurance, in
light of the nature of the transactions or services envisaged, that the
client is capable of making his own investment decisions and understands the
risks involved. Those investment firms shall
inform their clients about the conditions established in the Directive for the
categorisation of clients.

ò new

Article 98

Repeal

Directive
2004/39/EC together with its successive amendments are repealed with effect
from [...]. References to the Directive 2004/39/EC or to Directive 93/22/EEC
shall be construed as references to this Directive. References to terms defined
in, or Articles of, Directive 2004/39/EC or Directive 93/22/EEC shall be
construed as references to the equivalent term defined in, or Article of, this
Directive.

Article 99

Transitional
provisions

1. Existing third
country firms shall be able to continue to provide services and activities in Member
States, in accordance with national regimes until [4 years after the entry into
force of this directive].

2. The Commission
shall be empowered to adopt delegated acts in accordance with Article 94 to
extend the period of application of paragraph 1, taking into account the
equivalence decisions already adopted by the Commission in accordance with
Article 41 (3) and expected developments in the regulatory and supervisory
framework of third countries.

ê 2004/39/EC
(adapted)

Article 10072

Entry into force

This Directive shall enter into force on
the day
of Ö twentieth
day following that of Õ its
publication in the Official Journal of the European Union.

Article 10173

Addressees

This Directive is addressed to the Member
States.

ANNEX I

LIST OF SERVICES AND ACTIVITIES AND
FINANCIAL INSTRUMENTS

Section
A

Investment services and activities

(1) Reception and transmission of orders in
relation to one or more financial instruments;.

(2) Execution of orders on behalf of
clients;.

(3) Dealing on own account;.

(4) Portfolio management;.

(5) Investment advice;.

(6) Underwriting of financial instruments
and/or placing of financial instruments on a firm commitment basis;.

(7) Placing of financial instruments
without a firm commitment basis;

(8) Operation of Multilateral Trading
Facilities;.

ò new

(9) Safekeeping
and administration of financial instruments for the account of clients,
including custodianship and related services such as cash/collateral management;

(10) Operation of
Organised Trading Facilities.

ê 2004/39/EC
(adapted)

ð new

Section
B

Ancillary services

(1) Safekeeping
and administration of financial instruments for the account of clients,
including custodianship and related services such as cash/collateral management;

(1)(2) Granting
credits or loans to an investor to allow him to carry out a transaction in one
or more financial instruments, where the firm granting the credit or loan is
involved in the transaction;

(2)(3) Advice to
undertakings on capital structure, industrial strategy and related matters and
advice and services relating to mergers and the purchase of undertakings;

(3)(4) Foreign
exchange services where these are connected to the provision of investment
services;

(4)(5) Investment
research and financial analysis or other forms of general recommendation
relating to transactions in financial instruments;

(5)(6) Services
related to underwriting.

(6)(7) Investment
services and activities as well as ancillary services of the type included
under Section A or B of Annex 1 related to the underlying of the derivatives
included under Section C – 5, 6, 7 and 10 - where these are connected to the
provision of investment or ancillary services.

Section
C

Financial Instruments

(1) Transferable securities;

(2) Money-market instruments;

(3) Units in collective investment
undertakings;

(4) Options, futures, swaps, forward rate
agreements and any other derivative contracts relating to securities,
currencies, interest rates or yields, ð emission allowances ï or other derivatives instruments, financial indices or financial
measures which may be settled physically or in cash;

(5) Options, futures, swaps, forward rate
agreements and any other derivative contracts relating to commodities that must
be settled in cash or may be settled in cash at the option of one of the
parties (otherwise
than by reason of a
default or other termination event);

(6) Options, futures, swaps, and any other
derivative contract relating to commodities that can be physically settled
provided that they are traded on a regulated market ð, OTF, ï and/or
an MTF;

(7) Options, futures, swaps, forwards and
any other derivative contracts relating to commodities, that can be physically
settled not otherwise mentioned in C.6 and not being for commercial purposes,
which have the characteristics of other derivative financial instruments,
having regards to whether, inter alia, they are cleared and settled through
recognised clearing houses or are subject to regular margin calls;

(8) Derivative instruments for the transfer
of credit risk;

(9) Financial contracts for differences.

(10) Options, futures, swaps, forward rate
agreements and any other derivative contracts relating to climatic variables,
freight rates, emission allowances
or inflation rates or other official economic statistics that must be settled
in cash or may be settled in cash at the option of one of the parties (otherwise
than by reason of a
default or other termination event), as well as any other derivative
contracts relating to assets, rights, obligations, indices and measures not
otherwise mentioned in this Section, which have the characteristics of other
derivative financial instruments, having regard to whether, inter alia, they
are traded on a regulated market ð, OTF, ï or an MTF, are cleared and settled through recognised clearing
houses or are subject to regular margin calls.

ò new

(11) Emission
allowances consisting of any units recognised for compliance with the
requirements of Directive 2003/87/EC (Emissions Trading Scheme)

Section D

List of Data
Reporting Services

(1) Operating an
approved publication arrangement;

(2) Operating a
consolidated tape provider;

(3) Operating an
approved reporting mechanism.

ê 2004/39/EC
(adapted)

ð new

ANNEX II

PROFESSIONAL CLIENTS FOR THE
PURPOSE OF THIS DIRECTIVE

Professional client is a client who
possesses the experience, knowledge and expertise to make its own investment
decisions and properly assess the risks that it incurs. In order to be
considered a professional client, the client must comply with the following criteria:

I.
Categories of client who are considered to be professionals

The following should all be regarded as
professionals in all investment services and activities and financial
instruments for the purposes of the Directive.

(1)
 Entities which are required to be authorised or
regulated to operate in the financial markets. The list below should be
understood as including all authorised entities carrying out the characteristic
activities of the entities mentioned: entities authorised by a Member State
under a Directive, entities authorised or regulated by a Member State without
reference to a Directive, and entities authorised or regulated by a non-Member
State:

(a)
Credit institutions;

(b)
Investment firms;

(c)
Other authorised or regulated financial
institutions;

(d)
Insurance companies;

(e)
Collective investment schemes and management
companies of such schemes;

(f)
Pension funds and management companies of such
funds;

(g)
Commodity and commodity derivatives dealers;

(h)
Locals;

(i)
Other institutional investors;

(2)
Large undertakings meeting two of the following
size requirements on a company basis:

— balance sheet total: || EUR 20000000,

— net turnover: || EUR 40000000,

— own funds: || EUR 2000000.

(3)
 National and regional governments, Ö including Õ public bodies
that manage public debt Ö at
national or regional level Õ , Central
Banks, international and supranational institutions such as the World Bank, the
IMF, the ECB, the EIB and other similar international organisations.

(4)
Other institutional investors whose main
activity is to invest in financial instruments, including entities dedicated to
the securitisation of assets or other financing transactions.

The entities mentioned above are considered
to be professionals. They must however be allowed to request non-professional
treatment and investment firms may agree to provide a higher level of
protection. Where the client of an investment firm is an undertaking referred
to above, the investment firm must inform it prior to any provision of services
that, on the basis of the information available to the firm, the client is
deemed to be a professional client, and will be treated as such unless the firm
and the client agree otherwise. The firm must also inform the customer that he
can request a variation of the terms of the agreement in order to secure a
higher degree of protection.

It is the responsibility of the client,
considered to be a professional client, to ask for a higher level of protection
when it deems it is unable to properly assess or manage the risks involved.

This higher level of protection will be
provided when a client who is considered to be a professional enters into a
written agreement with the investment firm to the effect that it shall not be
treated as a professional for the purposes of the applicable conduct of
business regime. Such agreement should specify whether this applies to one or
more particular services or transactions, or to one or more types of product or
transaction.

II.
Clients who may be treated as professionals on request

II.1. Identification criteria

Clients other than those mentioned in
section I, including public sector bodies Ö local
public authorities, municipalities Õ and private
individual investors, may also be allowed to waive some of the protections
afforded by the conduct of business rules.

Investment firms should therefore be
allowed to treat any of the above clients as professionals provided the
relevant criteria and procedure mentioned below are fulfilled. These clients
should not, however, be presumed to possess market knowledge and experience
comparable to that of the categories listed in Ssection I.

Any such waiver of the protection afforded
by the standard conduct of business regime shall be considered valid only if an
adequate assessment of the expertise, experience and knowledge of the client,
undertaken by the investment firm, gives reasonable assurance, in light of the
nature of the transactions or services envisaged, that the client is capable of
making his own investment decisions and understanding the risks involved.

The fitness test applied to managers and
directors of entities licensed under Directives in the financial field could be
regarded as an example of the assessment of expertise and knowledge. In the
case of small entities, the person subject to the above assessment should be
the person authorised to carry out transactions on behalf of the entity.

In the course of the above assessment, as a
minimum, two of the following criteria should be satisfied:

–
the client has carried out transactions, in
significant size, on the relevant market at an average frequency of 10 per
quarter over the previous four quarters,

–
the size of the client's financial instrument
portfolio, defined as including cash deposits and financial instruments exceeds
EUR 500000,

–
the client works or has worked in the financial
sector for at least one year in a professional position, which requires
knowledge of the transactions or services envisaged.

ð Member States may adopt specific
criteria for the assessment of the expertise and knowledge of municipalities
and local public authorities requesting to be treated as professional clients.
These criteria can be alternative or additional to the ones listed in the
previous paragraph. ï

II.2. Procedure

The clients defined above may waive the
benefit of the detailed rules of conduct only where the following procedure is
followed:

–
they must state in writing to the investment
firm that they wish to be treated as a professional client, either generally or
in respect of a particular investment service or transaction, or type of
transaction or product,

–
the investment firm must give them a clear
written warning of the protections and investor compensation rights they may
lose,

–
they must state in writing, in a separate
document from the contract, that they are aware of the consequences of losing
such protections.

Before deciding to accept any request for
waiver, investment firms must be required to take all reasonable steps to
ensure that the client requesting to be treated as a professional client meets
the relevant requirements stated in Section II.1 above.

However, if clients have already been
categorised as professionals under parameters and procedures similar to those
above, it is not intended that their relationships with investment firms should
be affected by any new rules adopted pursuant to this Annex.

Firms must implement appropriate written
internal policies and procedures to categorise clients. Professional clients
are responsible for keeping the firm informed about any change, which could
affect their current categorisation. Should the investment firm become aware
however that the client no longer fulfils the initial conditions, which made
him eligible for a professional treatment, the investment firm must take
appropriate action.

LEGISLATIVE FINANCIAL STATEMENT

to be used for any proposal or initiative submitted to
the legislative authority

(Articles 28 of the Financial Regulation and 22 of the
implementing rules)

1.           FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1.    Title
of the proposal/initiative

1.2.    Policy area(s) concerned in the ABM/ABB
structure

1.3.    Nature
of the proposal/initiative

1.4.    Objective(s)

1.5.    Grounds
for the proposal/initiative

1.6.    Duration
and financial impact

1.7.    Management method(s) envisaged

2.           MANAGEMENT MEASURES

2.1.    Monitoring and reporting rules

2.2.    Management
and control system

2.3.    Measures
to prevent fraud and irregularities

3.           ESTIMATED FINANCIAL IMPACT OF THE
PROPOSAL/INITIATIVE

3.1.    Heading(s) of the multiannual financial
framework and expenditure budget line(s) affected

3.2.    Estimated impact on expenditure

3.2.1. Summary of estimated impact on expenditure

3.2.2. Estimated impact on operational appropriations

3.2.3. Estimated impact on appropriations of an
administrative nature

3.2.4. Compatibility with the current multiannual
financial framework

3.2.5. Third-party participation in financing

3.3.    Estimated impact on revenue

LEGISLATIVE FINANCIAL STATEMENT FOR PROPOSALS

1.           FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1.        Title of the
proposal/initiative

Directive of the European Parliament and of the Council amending
Directive 2004/39/EC on the Markets in Financial Instruments Directive (MiFID)

Regulation of the European Parliament and of the Council on the
Markets in Financial Instruments

1.2.        Policy area(s) concerned
in the ABM/ABB structure[65]

Internal Market – Financial markets

1.3.        Nature of the
proposal/initiative

x The proposal/initiative relates to
a new action

 ̈ The proposal/initiative relates to
a new action following a pilot project/preparatory action[66]

 ̈ The proposal/initiative relates to
the extension of an existing action

 ̈ The proposal/initiative relates to
an action redirected towards a new action

1.4.        Objectives

1.4.1      The Commission's
multiannual strategic objective(s) targeted by the proposal/initiative

Strengthen investor confidence; reduce the risks of market disorder;
reduce systemic risks; and increase efficiency of financial markets and reduce
unnecessary costs for participants.

1.4.2.     Specific objective(s) and
ABM/ABB activity(ies) concerned

Specific objective No..

In the light of the general objectives above, the following specific
objectives are relevant:

- Ensure a level playing field between market participants;

- Increase market transparency for market participants;

- Reinforce transparency towards and powers of regulators in key
areas and increase coordination at European level;

- Raise investor protection

- Address organisational deficiencies and excessive risk taking or
lack of control by investment firms and other market participants

ABM/ABB activity(ies) concerned

1.4.3.     Expected result(s) and
impact

Specify the effects
which the proposal/initiative should have on the beneficiaries/groups targeted.

The proposal aims at:

- regulating appropriately all market and trading structures taking
into account the needs of smaller participants, especially SMEs

- setting up relevant framework around new trading practices

- improving trade transparency for market participants on equities
and increase it for non equities market

- reinforcing transparency towards and powers of regulators

- improving consistency in the implementation of rules and
coordination in supervision by national regulators

- improving transparency and oversight of commodities derivatives
markets

- reinforcing regulation on products, services and services providers
when needed

- strengthening the rules of business conducts of investment firms

- making organizational requirements for investment firms more
strict

1.4.4.     Indicators of results and
impact

Specify the
indicators for monitoring implementation of the proposal/initiative.

•        A report assessing the impact on the market of the new
Organised Trading Facilities and the supervisory experiences acquired by
regulators; impact indicators should be the number of Organised Trading
Facilities licensed in the EU; the trading volume generated by them per
financial instrument as opposed to other venues and particular over the counter
trading;

•        a report on the progress made in moving trading in
standardised OTC derivatives to exchanges or electronic trading platforms;
impact indicators should be the number of facilities engaging in OTC
derivatives trading; and the trading volume of exchanges and platforms in OTC
derivatives as opposed to volume remaining over the counter;

•        a report on the functioning in practice of the tailor-made
regime for SME markets; impact indicators should be the number of MTFs which
have registered as SME growth market, the number of issuers choosing to have
their financial instruments traded on the new designated SME growth market; and
the change in trading volume in SME issuers following implementation of the
MiFID Review;

•        a report on the impact in practice of the newly introduced
requirements regarding automated and high-frequency trading; impact indicators
should be the number of high-frequency firms newly authorised; and the number
of cases of disorderly trading (if any) perceived to be related to
high-frequency trading;

•        a report on the impact in practice of the newly designed
transparency rules in equities trading; impact indicators should be the
percentage of trading volume being executed following pre-trade transparent
rules as opposed to dark orders; and the development in trading volume and
transparency levels in equity like instruments other than shares;

•        a report on the impact in practice of the newly designed
transparency rules in bonds, structured products and derivatives trading;
impact indicators for these two reports should be the size of spreads
designated market-makers offer following implementation of the new transparency
rules; and associated with that the development in costs of trading for
instruments of various liquidity levels across the different asset classes;

•        a report on the functioning of the consolidated tape in
practice; impact indicators should be the number of providers offering the
service of a consolidated tape; and the percentage of trading volume they cover
and the reasonableness of the prices they charge;

•        a report on the experience with the mechanism for banning
certain products or practices; impact indicators should be the number of times
the banning mechanisms have been utilised; and the effectiveness of such bans
in practice;

•        a report on the impact of the proposed measures in the
commodity derivatives markets; impact indicator should be the change in price
volatility on commodity derivatives markets following implementation of the
MiFID Review;

•        a report on the experience with the third country regime
and a stock-taking of number and type of third country participants granted
access; impact indicators should be the uptake of third country firms of the
new regime; and the supervisory experiences in practice with such firms; and

•        a report on experiences regarding the measures designed to
strengthen investor protection; impact indicators should be the development of
retail participation in trading of financial instruments following
implementation of the MiFID Review; and the number and severity of cases where
investors, in general, and retail investor, in particular, have suffered
losses.

1.5.        Grounds for the
proposal/initiative

1.5.1.     Requirement(s) to be met in
the short or long term

Short term, as a result of the implementation of the
directive/regulation in Member States:

- All market and trading structures taking into account the needs of
smaller participants, especially SMEs, would be properly regulated

- New trading practices such as high frequency trading would be
properly regulated

- Improved trade transparency for market participants on equities
and increased transparency for non equities market

- Reinforced transparency towards and powers of regulators

- Improved consistency in the implementation of rules and
coordination in supervision by national regulators

- Improved transparency and oversight of commodities derivatives
markets

- Reinforced regulation on products, services and services providers
when needed

- Strengthened conduct of business rules of investment firms

- Strengthened organizational requirements o investment firms

1.5.2.     Added value of EU involvement

Most of the issues covered by the revision are already covered by
the acquis and MiFID today. Further, financial markets are inherently
cross-border in nature and are becoming more so. International markets require
international rules to the furthest extent possible. The conditions according
to which firms and operators can compete in this context, whether it concerns
rules on pre and post-trade transparency, investor protection or the assessment
and control of risks by market participants need to be common across borders
and are all at the core of MiFID today. Action is now required at European
level in order to update and modify the regulatory framework laid out by MiFID
in order to take into account developments in financial markets since its
implementation.

1.5.3.     Lessons learned from
similar experiences in the past

The Markets in Financial Instruments Directive (MiFID), applied
since November 2007, is a core pillar in EU financial market integration. The
result after 3.5 years in force is more competition between venues in the trading
of financial instruments, and more choice for investors in terms of service
providers and available financial instruments, progress which has been
compounded by technological advances.

However, some problems have surfaced. First, the more competitive landscape
has given rise to new challenges. The benefits from this increased competition
have not flowed equally to all market participants and have not always been
passed on to the end investors, retail or wholesale. The market fragmentation
implied by competition has also made the trading environment more complex,
especially in terms of collection of trade data. Second, market and
technological developments have outpaced various provisions in MiFID. The
common interest in a transparent level playing-field between trading venues and
investment firms risks being undermined. Third, the financial crisis has
exposed weaknesses in the regulation of instruments other than shares, traded
mostly between professional investors. Previously held assumptions that minimal
transparency, oversight and investor protection in relation to this trading is
more conducive to market efficiency no longer hold. Eventually, rapid
innovation and growing complexity in financial instruments underline the
importance of up-to-date, high levels of investor protection. While largely
vindicated amid the experience of the financial crisis, the comprehensive rules
of MiFID nonetheless exhibit the need for targeted but ambitious improvements.

1.5.4.     Coherence and possible
synergy with other relevant instruments

The identified objectives are coherent with the EU's fundamental
goals of promoting a harmonised and sustainable development of economic
activities, a high degree of competitiveness, and a high level of consumer
protection, which includes safety and economic interests of citizens (Article
169 TFEU).

These objectives are also consistent with the reform programme
proposed by the European Commission in its Communication Driving European
Recovery. More recently in the Commission Communication of 2 June 2010 on
"Regulating Financial Services for Sustainable Growth" the Commission
indicated that it would propose appropriate revision of the MiFID.

In addition, other legislative proposals already or shortly to be,
adopted by the Commission complement the revision of MiFID in terms of
increasing market transparency and integrity as well as containing market
disorder and reinforce investor protection. The proposal for a Regulation on
short selling and certain aspects of Credit Default Swaps includes a short
selling disclosure regime which would make it easier for regulators to detect
possible cases of market manipulation. The proposal for a regulation on
derivatives, central counterparties and trade repositories will also increase
transparency of significant positions in derivatives for regulators as well as
reducing systemic risks for market participants. The revision of the MAD that
should be presented together with the review of MiFID will aim at enlarging the
scope and increasing the efficiency of the directive and contribute to better
and sounder financial markets. The issues of transparency requirements specific
to physical energy markets, as well as transaction reporting to ensure the
integrity of energy markets, are the subject of the Commission proposal for a
Regulation on energy market integrity and transparency .

1.6.        Duration and financial
impact

 ̈ Proposal/initiative of limited
duration

1.
 ̈                    Proposal/initiative in effect from [DD/MM]YYYY
to [DD/MM]YYYY

2.
 ̈                    Financial impact from YYYY to YYYY

x Proposal/initiative of unlimited duration

1.7.        Management mode(s)
envisaged[67]

x Centralised direct management by the Commission

 ̈ Centralised indirect management with the delegation of implementation tasks to:

3.
 ̈                    executive agencies

4.
 ̈                    bodies set up by the Communities[68]

5.
 ̈                    national public-sector bodies/bodies with
public-service mission

6.
 ̈                    persons entrusted with the implementation of
specific actions pursuant to Title V of the Treaty on European Union and
identified in the relevant basic act within the meaning of Article 49 of the
Financial Regulation

 ̈ Shared management with the Member States

 ̈ Decentralised management with third countries

 ̈ Joint management with international organisations (to be specified)

If more than one
management mode is indicated, please provide details in the
"Comments" section.

Comments

2.           MANAGEMENT MEASURES

2.1.        Monitoring and reporting
rules

Specify frequency
and conditions.

Article 81 of the draft Regulation establishing the European
Securities and Markets Authority provides for evaluation of the experience
acquired as a result of the operation of the Authority within three years from
the effective start of its operation. To this end, the Commission shall publish
a general report that shall be forwarded to the European Parliament and to the
Council.

2.2.        Management and control
system

2.2.1.     Risk(s) identified

An impact assessment has been carried out for the proposal to reform
the financial supervision system in the EU to accompany the draft Regulations
establishing the European Banking Authority, the European Insurance and
Occupational Pensions Authority and the European Securities Markets Authority.

The additional resource to ESMA foreseen as a result of the current
proposal is needed in order to allow ESMA to carry out its competences and
notably its role in:

- Ensuring harmonisation and coordination of rules applying to the
trading venues, and increasing the transparency of the derivatives markets by
specifying which classes of derivative should be traded on organised trading
venues.

- Ensuring a harmonised and improved level of transparency in both
the equities and non-equities markets by ensuring compatibility and consistency
of the exemptions to the pre trade transparency requirements and by specifying
standards fro data reporting in order to increase data quality and facilitate
data consolidation.

- Reinforcing and ensuring consistent application of national
regulatory powers by: Ensuring coordination of national powers relating to
product bans and position management in derivatives markets. In addition ESMA
would have direct powers in these fields to address threats to investor
protection and/or orderly markets in emergency situations; Ensuring minimum
harmonisation of administrative sanctions at EU level by issuing guidance; Ensuring
coordination and harmonisation of conditions of access granted to third country
firms.

- Ensuring harmonisation and coordination of rules relating to the
disclosure of positions by categories of traders in the commodity derivatives
markets which will improve the oversight and transparency of these markets.

- Ensuring harmonisation and coordination of rules specifying the
data relating to trading execution which would have to be disclosed by trading
venues in order to facilitate the best execution duties of investment firms.

- Reinforcing the corporate governance framework by specifying the
tasks of the nomination committee in charge of the nomination of the members of
the management body as well as drafting guidance on how to assess the
suitability of the management body's members.

The lack of this resource could not ensure a timely and efficient
fulfilment of the role of the Authority.

2.2.2.     Control method(s) envisaged

Management and control systems as provided for in the ESMA
Regulation will apply also with regard to the role of ESMA according to the
present proposal.

The final set of indicators to assess the performance of the
European Securities and Markets Authority will be decided by the Commission at
the time of conducting the first required evaluation. For the final assessment,
the quantitative indicators will be as important as the qualitative evidence
gathered in the consultations. The evaluation shall be repeated every three
years.

2.3.        Measures to prevent fraud
and irregularities

Specify existing or
envisaged prevention and protection measures.

For the purposes of combating fraud, corruption and any other
illegal activity, the provisions of Regulation (EC) No 1073/1999 of the
European Parliament and of the Council of 25 May 1999 concerning investigations
conducted by the European Anti-Fraud Office (OLAF) shall apply to the ESMA
without any restriction.

The Authority shall accede to the Interinstitutional Agreement of 25
May 1999 between the European Parliament, the Council of the European Union and
the Commission of the European Communities concerning internal investigations
by the European Anti-Fraud Office (OLAF) and shall immediately adopt
appropriate provisions for all staff of the Authority.

The funding decisions and the agreements and the implementing
instruments resulting from them shall explicitly stipulate that the Court of
Auditors and OLAF may, if need be, carry out on-the-spot checks on the
beneficiaries of monies disbursed by the Authority as well as on the staff
responsible for allocating these monies.

3.           ESTIMATED FINANCIAL IMPACT OF THE
PROPOSAL/INITIATIVE

3.1.        Heading(s) of the
multiannual financial framework and expenditure budget line(s) affected

· Existing expenditure budget lines

In order of
multiannual financial framework headings and budget lines.

Heading of multiannual financial framework || Budget line || Type of expenditure || Contribution

Number [Description........................................] || Diff./non-diff ([69]) || from EFTA[70] countries || from candidate countries[71] || from third countries || within the meaning of Article 18(1)(aa) of the Financial Regulation

|| [12.040401.01] ESMA – Subsidy under Titles 1 and 2 (Staff and administrative expenditure || Diff. || YES || NO || NO || NO

· New budget lines requested

In order of multiannual financial framework
headings and budget lines.

3.2.        Estimated impact on
expenditure

3.2.1.     Summary of estimated impact
on expenditure

EUR million (to 3 decimal places)

Heading of multiannual financial framework: || 1A || Competitiveness for Growth and Employment

DG: <MARKT> || || || Year 2013[72] || Year 2014 || Year 2015 || || ... enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL

Ÿ Operational appropriations || || || || || || || ||

12.0404.01 || Commitments || (1) || 0.394 || 0.675 || 0.675 || || || || || 1.744

Payments || (2) || 0.394 || 0.675 || 0.675 || || || || || 1.744

Number of budget line || Commitments || (1a) || || || || || || || ||

Payments || (2a) || || || || || || || ||

Appropriations of an administrative nature financed from the envelope for specific programmes[73] || || || || || || || ||

Number of budget line || || (3) || 0 || 0 || 0 || || || || ||

TOTAL appropriations for DG <MARKT> || Commitments || =1+1a +3 || 0.394 || 0.675 || 0.675 || || || || || 1.744

Payments || =2+2a +3 || 0.394 || 0.675 || 0.675 || || || || || 1.744

Ÿ TOTAL operational appropriations || Commitments || (4) || 0 || 0 || 0 || || || || ||

Payments || (5) || 0 || 0 || 0 || || || || ||

Ÿ TOTAL appropriations of an administrative nature financed from the envelope for specific programmes || (6) || 0 || 0 || 0 || || || || ||

TOTAL appropriations under HEADING <1A> of the multiannual financial framework || Commitments || =4+ 6 || 0.394 || 0.675 || 0.675 || || || || || 1.744

Payments || =5+ 6 || 0.394 || 0.675 || 0.675 || || || || || 1.744

Comments:

1) Tasks in relation to all market and trading
structures

Trading venues

ESMA will have to draft a certain 4 binding
technical standards (BTS) regarding the notification process of trading venues
to competent authorities, the publication and the circumstances under which
trading of financial instruments have to be suspended, as well as the
cooperation and exchange of information between trading venues.

Trading of derivatives

ESMA will have to draft 2 BTS stating which
classes of derivatives or a subset thereof should only be traded on organised trading
venues as well as specifying the criteria to determine whether a class of
derivative or a subset thereof is deemed to be sufficiently liquid to be traded
on organised trading venues.

2) Trade transparency in equities and non
equities market

Equities markets

ESMA will be required to publish an opinion
assessing the compatibility of each pre-trade transparency waiver with the pre-trade
transparency requirements for Regulated Markets, MTFs and OTFs and shall submit
an annual report to the Commission on how they are used in practice.

ESMA will be required to monitor the
application of the arrangements for deferred post-trade publication by trading
venues and shall submit an annual report to the Commission on how they are used
in practice.

Non equities

ESMA will be required to publish an opinion
assessing the compatibility of each pre-trade transparency waiver with the
pre-trade transparency requirements for Regulated Markets, MTFs and OTFs and
shall submit an annual report to the Commission on how they are used in
practice. ESMA will also have to monitor the pre-trade transparency obligations
in bonds, structured finance products, and clearing-eligible derivatives
investment firms have when trading OTC and report to the Commission on the
application of this obligation within 2 years of entry into force.

ESMA will be required to monitor the
application of the arrangements for deferred post-trade publication by trading
venues and shall submit an annual report to the Commission on how they are used
in practice.

Data reporting services

ESMA will have to develop 3 BTS specifying data
formats and standards to be used by trading venues, investment firms and by
Approved Publication Arrangements (APAs) in order to facilitate the
consolidation of post-trade information for both equities and non-equities
markets, as well as the information to be provided to the competent authorities
by data reporting service providers applying for an authorisation.

3) Reinforced transparency towards and powers
of regulators; Improved consistency in the implementation of rules and
coordination in supervision by national regulators

Product bans

ESMA will have to coordinate the actions taken
by national competent authorities to permanently ban a financial product or
practice. In addition ESMA will have direct powers to temporarily ban products
or services in emergency situations.

Coordination of national position management
measures and position limits by ESMA

ESMA will perform a facilitation and
coordination role in relation to position management and position limit powers
exercised by national competent authorities. In addition ESMA will have direct
powers to request information from any person on positions held in any type of
derivatives, request any person to reduce the size of a position held, and
limit the ability of persons to enter into a commodity derivative contract.

Sanctions

ESMA will have to issue guidelines addressed to
competent authorities in accordance with Article 16 of Regulation No (EU)
1095/2010 on types of administrative measures and sanctions and level of
administrative pecuniary sanctions to be applied in individual cases within the
national legal framework.

ESMA shall develop 1 BTS concerning the
procedures and forms for submitting information on administrative measures,
sanctions, pecuniary and criminal penalties by national competent authorities
to ESMA.

Conditions of access of third country firms

ESMA will have a registration role in relation
to non-EU firms intending to provide investment services and activities in the
Union without the establishment of a branch in one of the Member States. In
addition ESMA will have to develop draft regulatory technical standards to
determine the information that the applicant third country firm shall provide
to ESMA in its application and will have to conclude cooperation arrangements with
the competent authority of the third countries whose legal and supervisory
frameworks have been recognised as equivalent to the ones in the Union.4)
Improved transparency and oversight of commodities derivatives markets

Position reporting by categories of traders

ESMA shall develop 1 BTS specifying the thresholds
beyond which positions by categories of traders should be made public, the format
of the weekly reports making public the open positions by categories of
traders, and the content of the information to be provided by members and
market participants of RMs, MTFs and OTFs.

5) Strengthened conduct of business rules of
investment firms

Best execution

ESMA will have to develop 2 BTS specifying the content,
the format and the periodicity of data related to the quality of execution to
be published by trading venues, as well as taking determining the content and
the format of information to be published by investment firms regarding the top
five execution venues where they executed client orders.

ESMA will have to issue guidelines for the
assessment of financial instruments incorporating a structure which makes it
difficult for the client to understand the risk involved.

6) Strengthened organizational requirements of
investment firms

Corporate governance

ESMA shall ensure the existence of guidelines
for the assessment of the suitability of the members of the management body,
taking into account different roles and functions carried out by them.

ESMA will be required to develop 1 BTS
specifying the tasks of the nomination committee dealing in charge of the
nomination of the members of the management body.

If more than one heading is affected by the proposal /
initiative:

Ÿ TOTAL operational appropriations || Commitments || (4) || || || || || || || ||

Payments || (5) || || || || || || || ||

Ÿ TOTAL appropriations of an administrative nature financed from the envelope for specific programmes || (6) || || || || || || || ||

TOTAL appropriations under HEADINGS 1 to 4 of the multiannual financial framework (Reference amount) || Commitments || =4+ 6 || 0.394 || 0.675 || 0.675 || || || || || 1.744

Payments || =5+ 6 || 0.394 || 0.675 || 0.675 || || || || || 1.744

Heading of multiannual financial framework: || 5 || " Administrative expenditure "

EUR million (to 3 decimal places)

|| || || Year 2012 || Year 2013 || Year 2014 || || ... enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL

DG: <MARKT> ||

Ÿ Human resources || 0 || 0 || 0 || || || || ||

Ÿ Other administrative expenditure || 0 || 0 || 0 || || || || ||

TOTAL DG <.......> || Appropriations || || || || || || || ||

TOTAL appropriations under HEADING 5 of the multiannual financial framework || (Total commitments = Total payments) || 0 || 0 || 0 || || || || ||

EUR million (to 3 decimal places)

|| || || Year 2012[74] || Year 2013 || Year 2014 || || ... enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL

TOTAL appropriations under HEADINGS 1 to 5 of the multiannual financial framework || Commitments || 0.394 || 0.675 || 0.675 || || || || || 1.744

Payments || 0.394 || 0.675 || 0.675 || || || || || 1.744

3.2.2.     Estimated impact on
operational appropriations

7.
 ̈                    The proposal/initiative does not require the use
of operational appropriations

8.
x                   The proposal/initiative requires the use of
operational appropriations, as explained below:

The specific objectives of the proposal
are set out under 1.4.2. They will be reached through the legislative measures
proposed, to be implemented at national level, and through the involvement of
the European Securities and Markets Authority.

In particular, although it is not possible
to attribute concrete numerical outputs to each operational objective, ESMA role
should contribute to improving the confidence of investors and derivative
markets users, large reduction in systemic risks and substantial improvement in
market efficiency. First, the improved transparency rules on equities and the
new transparency rules on bonds and derivatives combined with the new reporting
obligations and systems will greatly increase the level of transparency of
financial markets, including commodities markets, towards regulators and market
participants. Coupled with new powers for regulators, this should result in
more orderly functioning of financial markets across the board. Second, the new
obligations imposed on investment firms in terms of organisation, process and
risk controls will strongly reinforce investor protection and therefore raise
investor confidence. Third, the new trading framework and obligations imposed
on some market participants will at the same time decrease systemic risk and
lead to more efficient markets.

3.2.3.     Estimated impact on
appropriations of an administrative nature

3.2.3.1.  Summary

9.
x                   The proposal/initiative does not require the use
of administrative appropriations

10.
 ̈  The proposal/initiative requires the use of administrative
appropriations, as explained below:

3.2.3.2.  Estimated requirements of
human resources

11.
x The proposal/initiative does not require the use of human resources

12.
 ̈  The proposal/initiative requires the use of human resources, as
explained below:

Comment:

No additional human and administrative
resources will be needed in DG MARKT as a result of the proposal. Resources
currently deployed to follow directive 1997/9/EC will continue to do so.

3.2.4.     Compatibility with the
current multiannual financial framework

13.
 ̈  Proposal/initiative is compatible the current multiannual
financial framework.

14.
x Proposal/initiative will entail reprogramming of the relevant
heading in the multiannual financial framework.

The proposal provides for extra tasks to be carried out by ESMA.
This will require additional resources under budget line 12.0404.01

15.
 ̈  Proposal/initiative requires application of the flexibility
instrument or revision of the multiannual financial framework[75].

Explain what is required, specifying the
headings and budget lines concerned and the corresponding amounts.

3.2.5.     Third-party contributions

16.
 ̈  The Proposal/initiative does not provide for co-financing by third
parties

17.
x The Proposal/initiative provides for the co-financing estimated
below:

Appropriations in EUR million (to 3 decimal places)

|| Year 2012 || Year 2012 || Year 2014 || || ... enter as many years as necessary to show the duration of the impact (see point 1.6) || Total

Specify the co-financing body MEMBER STATES via EU national supervisors(*) || 0.591 || 1.013 || 1.013 || || || || || 2.617

TOTAL appropriations cofinanced || 0.591 || 1.013 || 1.013 || || || || || 2.617

(*) Estimation based on current financing
mechanism in draft ESMA regulation (Member States 60% - Community 40%).

3.3.        Estimated impact on
revenue

18.
x Proposal/initiative has no financial impact on revenue.

19.
 ̈  Proposal/initiative has the following financial impact:

20.
 ̈            on own resources

21.
 ̈            on miscellaneous revenue

ANNEX

Annex to Legislative Financial Statement
for proposal for a Directive of the European Parliament and of the Council
amending Directive 2004/39/EC on the Markets in Financial Instruments Directive
(MiFID) and for a Regulation of the European Parliament and of the Council on
the Markets in Financial Instruments

Applied methodology and main underlying
assumptions

The costs related to tasks to be carried
out by ESMA stemming from the two proposals have been estimated for staff
expenditure (Title 1), in conformity with the cost classification in the ESMA
draft budget for 2012 submitted to the Commission.

The two proposals of the Commission include
provisions for ESMA to develop some 14 sets of new binding technical standards
(BTS) that should ensure that provisions of highly technical nature are
consistently implemented across the EU. According to the proposals, ESMA is
expected to deliver some 50% of the new BTS in 2013. To meet this goal,
increase in staffing level is required already starting with 2013. As regards
the nature of positions, the successful and timely delivery of new BTS will
require, in particular, additional policy, legal and impact assessment
officers.

Based on the estimates of the Commission
services and ESMA, the following assumptions were applied to assess the impact
on number of FTEs required to develop BTS related to the two proposals:

–
One policy officer drafts 2 BTS of average
complexity per year; this implies that 4 policy officers are needed for 2013;

–
One impact assessment officer is needed for 8
BTS processes; this implies that 1 impact assessment officers is needed for
2013;

–
One legal officer is needed to draft 5 BTS; this
implies that 1 legal officer is needed for 2013;

–
One additional support FTEs are needed to
provide support to the above positions on a daily basis.

Hence, delivery of BTS that are falling due
in 2013 requires 7 FTEs.

In addition to BTS, ESMA would have to
draft 3 sets of guidelines (sanctions, complexity of financial instruments,
corporate governance) and one report on the application of pre-trade obligation
for non-equities when traded OTC. These tasks would require 2 additional policy
officers.

Lastly ESMA would be entrusted with some
permanent tasks in the field of pre-trade transparency waivers and post-trade
deferred publication for equities and non-equities markets, product bans, and
position management. These tasks would require 2 additional policy officers.

Overall this means an additional 11 FTEs
are needed.

Other assumptions:

–
based on the distribution of FTEs in 2012 draft
budget, additional 11 FTEs are assumed to be comprised of 8 temporary agents
(74%), 2 seconded national expert (16%) and 1 contractual agent (10%);

–
average annual salary costs for different
categories of personnel are based on DG BUDG guidance;

–
salary weighting coefficient for Paris of 1.27;

–
training costs assumed at €1,000 per FTE per
year;

–
mission costs of €10,000, estimated based on
2012 draft budget for missions per headcount;

–
recruiting-related costs (travel, hotel, medical
examinations, installation and other allowances, removal costs, etc) of €12,700,
estimated based on 2012 draft budget for recruiting per new headcount.

It was assumed that the workload behind the
above increase in FTEs will be maintained in 2014 onwards, and is linked, in
part, to amending the already developed BTS and, in part, to preparing the
remaining 50% of BTS under the two legislative proposals.

The method of calculating the increase in
the required budget for the next three years is presented in more detail in
table below. The calculation reflects the fact that that the Community budget
funds 40% of the costs.

Cost type || Calculation || Amount (in thousands)

2013 || 2014 || 2015 || Total

|| || || || ||

Title 1: Staff expenditure || || || || ||

|| || || || ||

11 Salaries and allowances || || || || ||

- of which temporary agents || =8*127*1,27 || 658 || 1.317 || 1.317 || 3.293

- of which SNEs || =2*73*1,27 || 81 || 162 || 162 || 405

- of which contract agents || =1*64*1,27 || 45 || 89 || 89 || 223

|| || || || ||

12 Expenditure related to recruitment || || || || ||

|| =11*12,7 || 140 || || || 140

|| || || || ||

13 Mission expenses || || || || ||

|| =11*10 || 55 || 110 || 110 || 275

|| || || || ||

15 Training || =11*1 || 6 || 11 || 11 || 28

|| || || || ||

Total Title 1: Staff expenditure || || 985 || 1.689 || 1.689 || 4.363

|| || || || ||

Of which Community contribution (40%) || || 394 || 676 || 676 || 1.746

Of which Member State contribution (60%) || || 591 || 1.013 || 1.013 || 2.617

The following table presents the proposed
establishment plan for the nine temporary agent positions:

Function group and grade || Temporary posts ||

AD 16 || ||

AD 15 || ||

AD 14 || ||

AD 13 || ||

AD 12 || ||

AD 11 || ||

AD 10 || ||

AD 9 || 2 ||

AD 8 || 3 ||

AD 7 || 3 ||

AD 6 || ||

AD 5 || ||

|| ||

AD total || 8 ||

[1]               The
Mifid review is based on the "Lamfalussy process" (a four-level
regulatory approach recommended by the Committee of Wise Men on the Regulation
of European Securities Markets, chaired by Baron Alexandre Lamfalussy and
adopted by the Stockholm European Council in March 2001 aiming at more
effective securities markets regulation) as developed further by Regulation
(EU) No 1095/2010 of the European Parliament and of the Council, establishing a
European Supervisory Authority (European Securities and Markets Authority): at
Level 1, the European Parliament and the Council adopt a directive in
co-decision which contains framework principles and which empowers the
Commission acting at Level 2 to adopt delegated acts (Art 290 The Treaty on the
Functioning of the European Union C 115/47) or implementing acts (Art 291 The
Treaty on the Functioning of the European Union C 115/47). In the preparation
of the delegated acts the Commission will consult with experts appointed by
Member States. At the request of the Commission, ESMA can advise the Commission
on the technical details to be included in level 2 legislation. In addition,
Level 1 legislation may empower ESMA to develop draft regulatory or
implementing technical standards according to Art 10 and 15 of the ESMA
Regulation which may be adopted by the Commission (subject to a right of
objection by Council and Parliament in case of regulatory technical standards).
At Level 3, ESMA also works on recommendations, guidelines and compares
regulatory practice by way of peer review to ensure consistent implementation
and application of the rules adopted at Levels 1 and 2. Finally, the Commission
checks Member States' compliance with EU legislation and may take legal action
against non-compliant Member States.

[2]               Directive
2004/39/EC (MiFID Framework Directive)

[3]               Directive
2006/73/EC (MiFID Implementing Directive) implementing Directive 2004/39/EC
(MiFID Framework Directive)

[4]               Regulation
No 1287/2006 (MiFID Implementing Regulation) implementing Directive 2004/39/EC
(MiFID Framework Directive) as regards record-keeping obligations for
investment firms, transaction reporting, market transparency, admission of
financial instruments to trading and defined terms for the purposes of that
Directive (OJ L 241/1 2.09.2006)

[5]               Monitoring
Prices, Costs and Volumes of Trading and Post-trading Services, Oxera, 2011

[6]               See
(COM (2010) 301 final) Communication From The Commission To The European
Parliament, The Council, The European Economic And Social Committee And The
European Central Bank: Regulating Financial Services For Sustainable Growth,
June 2010

[7]               See
G-20 Leaders' statement of Pittsburgh Summit, 24-25 September 2009,
http://www.pittsburghsummit.gov/mediacenter/129639.htm

[8]               As
a result, the Commission issued (COM (2009) 563 final) Communication by the
Commission on ensuring efficient, safe and sound derivatives markets: future
policy actions, 20 October 2009

[9]               See
(COM (2010) 484) Proposal on Regulation on OTC derivatives, central
counterparties and trade repositories, September 2010

[10]             See
Report, High-level Group on Financial Supervision in the EU, chaired by Jacques
de Larosière, February 2009, and Council conclusions on strengthening EU
financial supervision, 10862/09, June 2009

[11]             See
responses to public consultation on the review of MiFID: http://circa.europa.eu/Public/irc/markt/markt_consultations/library?l=/financial_services/mifid_instruments&vm=detailed&sb=Title
and summary in Annex 13 of the Impact Assessment Report

[12]             The
summary is available at http://ec.europa.eu/internal_market/securities/docs/isd/10-09-21-hearing-summary_en.pdf

[13]             See CESR Technical Advice to the European Commission in
the Context of the MiFID Review and Responses to the European Commission
Request for Additional Information, 29 July 2010
http://www.esma.europa.eu/popup2.php?id=7003 and CESR second set of Technical
Advice to the European Commission in the Context of the MiFID Review and
Responses to the European Commission Request for Additional Information, 13
October 2010 http://www.esma.europa.eu/popup2.php?id=7279

[14]             These
studies have been completed by two external consultants that were selected
according to the selection process established within the rules and regulations
of the European Commission. These two studies do not reflect the views or
opinions of the European Commission

[15]             http://ec.europa.eu/internal_market/finservices-retail/investment_products_en.htm

[16]             COM (2010) 284

[17]             Directive 2003/87/EC establishing a scheme for
greenhouse gas emission allowance trading within the Community and amending
Council Directive 96/61/EC, OJ L 275, 25.10.2003, as last amended by Directive
2009/29/EC, OJ L 140, 5.6.2009, p. 63.

[18]             OJ C 71 E, 25.3.2003, p. 62.

[19]             OJ C 220, 16.9.2003, p. 1.

[20]             OJ C 144, 20.6.2003, p. 6.

[21]             Opinion of the European Parliament of
25 September 2003 (not yet published in the
Official Journal), Council Common Position of 8 December 2003 (OJ C
60 E, 9.3.2004, p. 1), Position of the European Parliament of 30
March 2004 (not yet published in the Official Journal) and Decision of the
Council of 7 April 2004.

[22]             OJ L 145, 30.4.2004,
p. 1.

[23]             OJ L 141, 11.6.1993, p. 27.
Directive as last amended by Directive 2002/87/EC of the European Parliament
and of the Council (OJ L 35, 11.2.2003, p. 1).

[24]             OJ 56, 4.4. 1964, p.
878/64. Directive as amended by the 1972 Act of Accession.

[25]             OJ L 228, 16.8.1973, p.
3. Directive as last amended by Directive 2002/87/EC.

[26]             OJ L 345, 19.12.2002,
p. 1.

[27]             [please add OJ
reference]

[28]             OJ L Ö 177,
30.6.2006, p.1. Õ 126,
26.5.2000, p. 1. Directive as last amended by Directive 2002/87/EC.

[29]             OJ L 247 , 21/09/2007, p. 1

[30]             Directive 2002/87/EC of the European Parliament and
of the Council of 16 December 2002 on the supplementary supervision of
credit institutions, insurance undertakings and investment firms in a financial
conglomerate (OJ L 35, 11.2.2003, p. 1)..

[31]             Directive 2006/49/EC of the European Parliament and
of the Council of 14 June 2006 on the capital adequacy of investment firms
and credit institutions (recast) (OJ L 177, 30.6.2006, p. 201).

[32]             Directive 2005/60/EC of the European Parliament and
of the Council of 26 October 2005 on the prevention of the use of
financial system for the purpose of money laundering and terrorist financing
(OJ L 309, 25.11.2005, p. 15).

[33]             OJ L 141,
11.6.1993 Ö 177,
30.6.2006, p. 201 Õ ,
p. 1. Directive as last amended by Directive 2002/87/EC.

[34]             OJ L 9, 15.1.2003, p. 3.

[35]             OJ L 168, 27.6.2002, p. 43.

[36]             OJ L 168, 27.6.2002, p. 43.

[37]             OJ L 201 , 31.7.2002, p. 37

[38]             OJ L 8, 12.1.2001, p. 1.

[39]             OJ L 241, 2.9.2006, p. 26.

[40]             OJ L 281, 23.11.1995, p. 31.

[41]             OJ L 184, 6.7.2001, p. 1. Directive as last amended by
European Parliament and Council Directive 2003/71/EC (OJ L 345, 31.12.2003, p.
64.).

[42]             OJ L 115, 17.4.1998, p. 31.

[43]             OJ L 281, 23.11.1995, p. 31.

[44]             OJ L 184, 17.7.1999, p. 23.

[45]             OJ L 55, 28.2.2011, p. 13.

[46]             OJ L 26, 31.1.1977, p. 1. Directive as last
amended by the 1994 Act of Accession.

[47]             OJ L 375,
31.12.1985, p. 3 Ö 302,
17.11.2009, p. 32 Õ . Directive
as last amended by Directive 2001/108/EC of the European Parliament and
of the Council (OJ L 41, 13.2.2002, p. 35).

[48]             OJ L 193, 18.7.1983, p. 1.
Directive as last amended by Directive 2003/51/EC of the
European Parliament and of the Council (OJ L 178, 17.7.2003,
p. 16).

[49]             OJ L 331,
15.12.2010, p. 84.

[50]             Council Directive
92/49/EEC of 18 June 1992 on the coordination of laws, regulations and
administrative provisions relating to direct insurance other than life
assurance (third non-life insurance Directive) (OJ L 228, 11.8.1992,
p. 1). Directive as last amended by Directive 2007/44/EC of the
European Parliament and of the Council (OJ L 247, 21.9.2007, p. 1).

[51]             Directive 2005/68/EC of
the European Parliament and of the Council of 16 November 2005 on
reinsurance (OJ L 323, 9.12.2005, p. 1). Directive as amended by
Directive 2007/44/EC.

[52]             Directive 2006/48/EC of the
European Parliament and of the Council of 14 June 2006 relating to the
taking up and pursuit of the business of credit institutions (recast) (OJ
L 177, 30.6.2006, p. 1). Directive as last amended by Directive
2007/44/EC.

[53]             OJ L 84, 26.3.1997, p. 22.

[54]             OJ L 96, 12.4.2003, p. 16.

[55]             è1 OJ
L 345, 31.12.2003, p. 64. ç

[56]             OJ L 126, 12.5.1984, p. 20.

[57]             OJ L 222, 14.8.1978, p. 11.
Directive as last amended by Directive 2003/51/EC of the European Parliament
and of the Council (OJ L 178, 17.7.2003, p. 16).

[58]             OJ L 191, 13.7.2001, p.45.

[59]             OJ L 55, 28.2.2011, p.13.

[60]             OJ L 191, 13.7.2001, p. 45.

[61]             è1 OJ
L 145, 30.4.2004, p. 1. ç

[62]             è1 OJ
L 145, 30.4.2004, p. 1. ç

[63]             OJ L 9, 15.1.2003, p. 3.

[64]             è1 OJ
L 145, 30.4.2004, p. 1. ç

[65]             ABM: Activity-Based Management
– ABB: Activity-Based Budgeting.

[66]             As referred to in Article 49(6)(a) or (b) of the Financial Regulation.

[67]             Details of management modes and
references to the Financial Regulation may be found on the BudgWeb site: http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html

[68]             As referred to in Article 185 of the Financial
Regulation.

[69]             Diff. = Differentiated appropriations / Non-Diff. =
Non-differentiated appropriations

[70]             EFTA: European Free Trade Association.

[71]             Candidate countries and, where applicable, potential
candidate countries from the Western Balkans.

[72]             Year N is the year in which implementation of the
proposal/initiative starts.

[73]             Technical and/or administrative assistance and
expenditure in support of the implementation of EU programmes and/or actions
(former "BA" lines), indirect research, direct research.

[74]             Year N is the year in which implementation of the
proposal/initiative starts.

[75]             See points 19 and 24 of the Interinstitutional
Agreement.