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) 
Date: 2011-10-20
Institutions: European Commission
Subjects: credit institution, financial instrument, financial legislation, investment company, official market, provision of services, securities

EUROPEAN COMMISSION 

Brussels, 20.10.2011 
COM(2011) 656 final 

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) 

{SEC(2011) 1226 final} 
{SEC(2011) 1227 final} 

 
 
 
 
  
 
 
 
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" 
process1,  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 increased5 

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. 
Directive 2004/39/EC (MiFID Framework Directive)  
Directive 2006/73/EC (MiFID Implementing Directive) implementing Directive 2004/39/EC (MiFID Framework Directive) 
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) 
Monitoring Prices, Costs and Volumes of Trading and Post-trading Services, Oxera, 2011 

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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  G207  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 repositories9. 

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 

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8 

9 

10 

See (COM (2010) 301 final) Communication From The Commission To The European Parliament, The Council, The European 

of 

G-20 

Leaders' 

statement 

Economic And Social Committee And The European Central Bank: Regulating Financial Services For Sustainable Growth, June 
2010 
See 
http://www.pittsburghsummit.gov/mediacenter/129639.htm 
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 
See (COM (2010) 484) Proposal on Regulation on OTC derivatives, central counterparties and trade repositories, September 2010 
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 

September 

Pittsburgh 

Summit, 

24-25 

2009, 

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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  201111,  a  large  and  well-attended  public 
hearing  was  held  over  two  days  on  20-21  September  201012,  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  studies14  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 

11 

12 

13 

14 

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=Tit
le and summary in Annex 13 of the Impact Assessment Report  
The summary is available at http://ec.europa.eu/internal_market/securities/docs/isd/10-09-21-hearing-summary_en.pdf 
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 
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 

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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 betw een €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 

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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. 

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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.  

15 

http://ec.europa.eu/internal_market/finservices-retail/investment_products_en.htm 

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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 

16 

COM (2010) 284 

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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, 

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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 

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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. 

EN 

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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 
Directive17.  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. 

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.  

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11 

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(cid:208)2004/39/EC 
(cid:214) 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 (cid:214) on the functioning of the European Union  establishing the 
European Community, and in particular Article 53(1)47(2) thereof, 

Having regard to the proposal from the Commission18, 

(cid:214) After transmission of the right legislative act to the national Parliaments,   

Having regard to the Opinion of the European Economic and Social Committee19, 

Having regard to the opinion of the European Central Bank20, 

(cid:214) After consulting the European Data Protection Supervisor,  

Acting in accordance with the (cid:214) ordinary legislative  procedure laid down in Article 251 of 
the Treaty21, 

Whereas: 

18 
19 
20 
21 

OJ C 71 E, 25.3.2003, p. 62. 
OJ C 220, 16.9.2003, p. 1. 
OJ C 144, 20.6.2003, p. 6. 
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. 

EN 

12 

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(1) 

(2) 

(3) 

(cid:216) new 

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/EEC22 has been substantially amended 
several  times.  Since  further  amendments  are  to  be  made,  it  should  be  recast  in  the 
interests of clarity. 

(cid:208) 2004/39/EC recital1 

investment  services 

the 
Council  Directive 93/22/EEC  of  10 May 1993  on 
securities field23 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. 

in 

(cid:208) 2004/39/EC recital 2 (adapted) 

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  ⌦ Union ⌫  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  ⌦ Union ⌫  ,  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.  

(cid:216) 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. 

22 
23 

OJ L 145, 30.4.2004, p. 1. 
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). 

EN 

13 

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(5) 

(6) 

(7) 

(cid:216) new 

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. 

(cid:216) new 

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. 

(cid:216) new 

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. 

(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. 

(cid:208) 2004/39/EC recital 3 

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14 

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(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. 

(cid:208) 2004/39/EC recital 4 

(cid:216) 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. 

(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. 

(cid:208) 2004/39/EC recital 7 (adapted) 

(cid:208) 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. 

(cid:208) 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 

EN 

15 

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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.  

(cid:216) 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. 

(cid:216) 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. 

(cid:208) 2004/39/EC recital 8 (adapted) 
(cid:214) 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  (cid:214) should  not  be  covered  by  the  scope  of  this  Directive   unless  they  are 
market  makers  (cid:214) ,  members  or  participants  of  a  regulated  market  or  MTF  or  they 

EN 

16 

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execute  orders  from  clients  by  dealing   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. (cid:214) 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.  

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

legal persons. 

(cid:208) 2004/39/EC recital 9 

(cid:208) 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 retrocession24, 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 assurance25  and  Council 
Directive 2002/83/EC  of  5 November 2002  concerning  life  assurance26  ⌦ 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 ⌫ should be excluded. 

24 
25 
26 
27 

OJ 56, 4.4. 1964, p. 878/64. Directive as amended by the 1972 Act of Accession. 
OJ L 228, 16.8.1973, p. 3. Directive as last amended by Directive 2002/87/EC. 
OJ L 345, 19.12.2002, p. 1. 
[please add OJ reference] 

EN 

17 

   EN 

 
 
 
                                                 
(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. 

(cid:208) 2004/39/EC recital 11 

(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. 

(cid:208) 2004/39/EC recital 12 

(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. 

(cid:208) 2004/39/EC recital 13 

(cid:208) 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. 

(cid:216) 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. 

(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 
⌦ Union ⌫ level, and the depositaries or managers of such undertakings, since they 
are subject to specific rules directly adapted to their activities. 

(cid:208) 2004/39/EC recital 15 (adapted) 

(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 

(cid:208) 2004/39/EC recital 16 

EN 

18 

   EN 

 
 
 
 
 
 
 
 
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. 

(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. 

(cid:208) 2004/39/EC recital 17 

(cid:208) 2004/39/EC recital 18 (adapted) 

(25)(18) 

are 

that 

Credit 

institutions 

under 
authorised 
Directive 2000/12/EC ⌦ 2006/48/EC ⌫  of 
the  European Parliament  and  of 
the Council  of  20 March 2000  ⌦ 14  June  2006 ⌫  relating  to  the  taking up  and 
pursuit of the business of credit institutions ⌦ (recast) ⌫ ⌦ 28 ⌫ 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. 

(cid:216) 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. 

(cid:216) 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 

28 

OJ  L  ⌦ 177,  30.6.2006,  p.1. ⌫  126,  26.5.2000,  p.  1.  Directive  as 
Directive 2002/87/EC. 

last  amended  by 

EN 

19 

   EN 

 
 
 
 
 
                                                 
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. 

(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. 

(cid:208) 2004/39/EC recital 19 

(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. 

(cid:208) 2004/39/EC recital 20 

(cid:216) 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. 

(cid:208) 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. 

(cid:208) 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, 

EN 

20 

   EN 

 
 
 
 
 
 
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. 

(cid:216) 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  sector29  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/EC30  and  2006/49/EC31;  whether  there  are 
reasonable grounds to suspect that money laundering or terrorist financing within the 
meaning  of  Article 1  of  Directive  2005/60/EC32  is  being  or  has  been  committed  or 
attempted, or that the proposed acquisition could increase the risk thereof. 

(cid:208) 2004/39/EC recital 23 (adapted) 

(33)(23) 

investment  services  or  perform 

An investment firm authorised in its home Member State should be entitled to 
provide 
the 
Community ⌦ Union ⌫ 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. 

investment  activities 

throughout 

(34)(24) 

Since certain investment firms are exempted from certain obligations imposed 
by  Council  Directive 93/6/EEC  of  15 March 1993  ⌦ 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) ⌫  ⌦ 33 ⌫  ,  they  should  be 

(cid:208) 2004/39/EC recital 24 (adapted) 

29 
30 

31 

32 

33 

OJ L 247 , 21/09/2007, p. 1 
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).. 
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). 
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). 
OJ  L  141,  11.6.1993  ⌦ 177,  30.6.2006,  p.  201 ⌫  ,  p.  1.  Directive  as  last  amended  by 
Directive 2002/87/EC. 

EN 

21 

   EN 

 
 
 
 
                                                 
the  European Parliament  and  of 

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 Council  of  9 December 2002  on 
insurance mediation34.  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  ⌦ Union ⌫  legislation  on  capital 
adequacy. 

(cid:208) 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. 

(cid:208) 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. 

(cid:208) 2004/39/EC recital 27 (adapted) 
(cid:214) 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 arrangements35, 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.(cid:214) 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 

34 
35 

OJ L 9, 15.1.2003, p. 3. 
OJ L 168, 27.6.2002, p. 43. 

EN 

22 

   EN 

 
 
 
 
                                                 
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  arrangements36,  for  the  purpose  of  securing  or 
otherwise covering their obligations.  

(cid:208) 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. 

(38) 

(39) 

(cid:216) new 

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. 

(cid:216) new 

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. 

36 

OJ L 168, 27.6.2002, p. 43. 

EN 

23 

   EN 

 
 
 
 
                                                 
(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. 

(cid:208) 2004/39/EC recital 29 

(cid:216) 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 data38. 

(cid:216) 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.  

(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 

(cid:216) new 

37 
38 
39 

OJ L 201 , 31.7.2002, p. 37 
OJ L 8, 12.1.2001, p. 1. 
OJ L 241, 2.9.2006, p. 26. 

EN 

24 

   EN 

 
 
 
 
 
                                                 
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. 

(cid:216) 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.  

(cid:216) 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. 

(cid:216) 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. 

EN 

25 

   EN 

 
 
 
 
(cid:216) 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.  

(cid:216) 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.  

(cid:216) 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. 

(cid:216) 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. 

EN 

26 

   EN 

 
 
 
 
 
(cid:216) 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. 

(52) 

(cid:216) new 

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. 

(cid:216) 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 

EN 

27 

   EN 

 
 
 
 
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. 

(cid:216) 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. 

(cid:208) 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. 

(cid:208) 2004/39/EC recital 31 
(cid:214) 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).  (cid:214) 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.  

(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 

(cid:208) 2004/39/EC recital 32 

EN 

28 

   EN 

 
 
 
 
 
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. 

(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. 

(cid:208) 2004/39/EC recital 33 

(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.  

(cid:216) new 

(cid:216) 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. 

(cid:208) 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. 

(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 ⌦ , OTF or systematic internaliser ⌫ . 

(cid:208) 2004/39/EC recital 35 (adapted) 

EN 

29 

   EN 

 
 
 
 
 
 
(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. 

(cid:208) 2004/39/EC recital 36 

(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. 

(cid:208) 2004/39/EC recital 37 

(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. 

(cid:208) 2004/39/EC recital 38 

(cid:208) 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. 

(66)(40) 

For the purposes of this Directive eligible counterparties should be considered 

as acting as clients. 

(cid:208) 2004/39/EC recital 40 

(cid:208) 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. 

(cid:216) 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 

EN 

30 

   EN 

 
 
 
 
 
 
 
 
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. 

(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. 

(cid:208) 2004/39/EC recital 42 

(cid:208) 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 

(cid:208) 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. 

40 

OJ L 281, 23.11.1995, p. 31. 

EN 

31 

   EN 

 
 
 
 
                                                 
(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. 

(cid:208) 2004/39/EC recital 45 

(cid:208) 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. 

(70)(47) 

Investment  firms  should  all  have  the  same  opportunities  of  joining  or  having 
access to regulated markets throughout the Community ⌦ Union ⌫ . 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. 

(cid:208) 2004/39/EC recital 47 (adapted) 

(cid:208) 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  ⌦ Union ⌫  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. 

(cid:216) 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.  

EN 

32 

   EN 

 
 
 
 
 
 
(cid:216) 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. 

(cid:216) 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. 

(cid:208) 2004/39/EC recital 49 (adapted) 
(cid:214) 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  (cid:214) or  OTF   are  to  be 
considered  as  concluded  within  the  systems  of  a  regulated  market,  or  MTF  (cid:214) or 
OTF  . 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  (cid:214) or  an  OTF   under  this  Directive  should  be  considered  as  transactions 
concluded outside a regulated market, or an MTF (cid:214) or an OTF  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. 

EN 

33 

   EN 

 
 
 
 
(cid:216) 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. 

(cid:216) new 

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

information  published 

transparency 

in 

(cid:216) 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. 

(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. 

(cid:208) 2004/39/EC recital 50 

(51)  Article 27 does not oblige systematic internalisers to publish firm quotes in relation to 

transactions above standard market size. 

(cid:208) 2004/39/EC recital 51 

(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. 

(cid:208) 2004/39/EC recital 52 

(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 

(cid:208) 2004/39/EC recital 53 

EN 

34 

   EN 

 
 
 
 
 
 
 
 
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. 

(54)  The  standard  market  size  for  any  class  of  share  should  not  be  significantly 

disproportionate to any share included in that class. 

(cid:208) 2004/39/EC recital 54 

(79)(55) 

Revision  of  Directive 93/6/EEC  ⌦ 2006/49/EC ⌫  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. 

(cid:208) 2004/39/EC recital 55 (adapted) 

(80)(56) 

Operators  of  a  regulated  market  should  also  be  able  to  operate  an  MTF  in 

accordance with the relevant provisions of this Directive. 

(cid:208) 2004/39/EC recital 56 

(cid:208) 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  securities41.  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. 

(cid:208) 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. 

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.). 

EN 

35 

   EN 

 
 
 
 
 
 
                                                 
(cid:216) 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. 

(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. 

(cid:216) new 

(cid:216) 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. 

(cid:216) 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.  

(cid:216) 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. 

EN 

36 

   EN 

 
 
 
 
 
 
(cid:216) 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. 

(cid:216) 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. 

(cid:216) 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. 

(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. 

(cid:216) new 

(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. 

(cid:208) 2004/39/EC recital 59 

EN 

37 

   EN 

 
 
 
 
 
 
(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. 

(cid:208) 2004/39/EC recital 60 

(cid:216) 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. 

(cid:216) 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. 

(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.  

(cid:216) new 

(cid:216) 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. 

(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.  

(cid:216) new 

EN 

38 

   EN 

 
 
 
 
 
 
 
(cid:216) 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. 

(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. 

(cid:216) new 

(101)  This  Directive  should  be  without  prejudice  to  any  provisions  in  the  law  of  Member 

States relating to criminal sanctions. 

(cid:216) new 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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  ⌦ are ⌫  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 
disputes42  (cid:214) and  Commission  Recommendation  2001/310/EC  on  the  principles  for 
out-of-court  bodies  involved  in  the  consensual  resolution  of  consumer  disputes  . 
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). 

(cid:208) 2004/39/EC recital 62 
(cid:214) 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  (cid:214) 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 

42 

OJ L 115, 17.4.1998, p. 31. 

EN 

39 

   EN 

 
 
 
 
 
 
                                                 
such  data43.  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 45/2001. 

(cid:208) 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. 

(cid:208) 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. 

(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. 

(cid:208) 2004/39/EC recital 65 

(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. 

(cid:208) 2004/39/EC recital 66 

(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 

(cid:208) 2004/39/EC recital 67 

43 

OJ L 281, 23.11.1995, p. 31. 

EN 

40 

   EN 

 
 
 
 
 
 
                                                 
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. 

(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 Commission44. 

(cid:208) 2004/39/EC recital 68(adapted) 

(cid:208) 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. 

(cid:208) 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. 

(cid:216) 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. 

44 

OJ L 184, 17.7.1999, p. 23. 

EN 

41 

   EN 

 
 
 
 
 
                                                 
(cid:216) 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 powers45. 

(cid:216) 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. 

(cid:216) 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. 

(cid:216) 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 

45 

OJ L 55, 28.2.2011, p. 13. 

EN 

42 

   EN 

 
 
 
 
 
                                                 
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. 

(cid:216) 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. 

(cid:208) 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  ⌦ Union ⌫  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 ⌦ Union ⌫ level, the Community ⌦ Union ⌫ 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, 

(cid:216) 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.  

(cid:216) 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. 

EN 

43 

   EN 

 
 
 
 
 
HAVE ADOPTED THIS DIRECTIVE: 

(cid:208) 2004/39/EC (adapted) 

TITLE I 

DEFINITIONS AND SCOPE 

Article 1 

Scope 

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

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

(a) authorisation and operating conditions for investment firms; 

(cid:216) new 

(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.  

(cid:208) 2004/39/EC (adapted) 
(cid:214) new 

32.The  following  provisions  shall  also  apply  to  credit  institutions  authorised  under 
Directive 2000/12/EC ⌦ 2006/48/EC ⌫ , when providing one or more investment services 
and/or performing investment activities (cid:214) 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 : 

– 

– 

– 

Articles 2(2), (cid:214) 9(6),  1411, 16, 1713 and 1814, 

Chapter  II  of  Title  II  excluding  Article  23(2)  second  subparagraph  ⌦ of  Article 
29(2) ⌫ , 

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

EN 

44 

   EN 

 
 
 
 
– 

– 

Articles 6948 to 8053, ⌦ and Articles ⌫ 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 
in  Article 1  of  Directive 2002/83/EC  or 
assurance undertakings  as  defined 
undertakings  carrying  on  the  reinsurance  and  retrocession  activities  referred to  in 
Directive 64/225/EEC ⌦ 2009/138/EC ⌫ ; 

(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 

(cid:214)(ii) are a member of or a participant in a regulated market or MTF;  or 

(iii)  deal  on  own account  (cid:214) by  executing  client  orders   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; 

(cid:214) 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;  

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

(f)  persons  which  provide 
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; 

investment  services  which  only 

(g) the members of the European System of Central Banks and other national bodies 
performing  similar  functions  (cid:214) in  the  Union,   and  other  public  bodies  charged 

EN 

45 

   EN 

 
 
 
 
 
 
 
 
with  or  intervening  in  the  management  of  the  public  debt  (cid:214) in  the  Union  and 
international bodies of which one or more Member States are members ; 

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

(i) persons (cid:214) who:   

(cid:214) -  deal   dealing  on  own  account  in  financial  instruments,  (cid:214) excluding  persons 
who deal on own account by executing client orders,  or  

(cid:214) - provide  providing investment services (cid:214) , other than dealing on own account, 
exclusively  for  their  parent  undertakings,  for  their  subsidiaries  or  for  other 
subsidiaries of their parent undertakings, or   

(cid:214) -  provide  investment  services,  other  than  dealing  on  own  account,   in 
commodity  derivatives  or  derivative  contracts  included  in  Annex  I,  Section  C  10 
(cid:214) or  emission  allowances  or  derivatives  thereof   to  the  clients  of  their  main 
business,  

provided  (cid:214) that  in  all  cases   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 ⌦ 2006/48/EC ⌫ ; 

(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. 

EN 

46 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
(cid:214) (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.  

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.  (cid:214) The  Commission  shall  adopt  delegated  acts  in  accordance  with  Article  94  concerning 
measures  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) 
⌦ and ⌫ (i), toand (k) define the criteria for determining ⌦ clarifying ⌫ 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. 

(cid:216) 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. 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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  (cid:214) provision  of 
investment  advice,  with  or  without   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; 

EN 

47 

   EN 

 
 
 
 
 
(ii)  credit  institutions  authorised  in  accordance  with  Directive 2000/12/EC 

⌦ 2006/48/EC ⌫ ; 

(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 
in 
Directive 93/6/EEC ⌦ 2006/49/EC ⌫ ; 

in  Directive 2000/12/EC  ⌦ 2006/48/EC ⌫ 

this  Directive, 

or 

(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 equivalent46, 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  (cid:214) authorised  and   regulated  at 
national  level.(cid:214) National  regimes  should  submit  those  persons  to  requirements 
which  are  at  least  analogous  to  the  following  requirements  under  the  present 
directive:  

(cid:214) (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;   

(cid:214) (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.  

(cid:214) 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.  

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. 

(cid:208) 2004/39/EC 

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. 

(cid:216) new 

46 

OJ L 26, 31.1.1977, p. 1. Directive as last amended by the 1994 Act of Accession. 

EN 

48 

   EN 

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

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 2008/10/EC Art. 1.2 
(cid:214) new 

Article 4 

Definitions 

(cid:214) 1.  For  the  purposes  of  this  Directive,  the  definitions  provided  in  Article  2  of  Regulation 
(EU) No …/… [MiFIR] shall apply to this Directive.  

21. For the purposes of this Directive, Thethe following definitions shall (cid:214) also  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; 

EN 

49 

   EN 

 
 
 
 
 
 
 
 
 
 
 
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 (cid:206)1 ---  (cid:214) adopt by means of delegated acts in accordance 
with Article 94 measures specifying  : 

– 

– 

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 (cid:214) . 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 ; 

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; 

EN 

50 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
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; 

(cid:216) new 

"SME  growth  market"  means  a  MTF  that  is  registered  as  an  SME  growth 

11) 
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; 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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; 

EN 

51 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 
Directive ⌦ 2006/48/EC ⌫ 2000/12/EC; 

institutions’  means 

credit 

institutions 

as 

defined 

under 

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

undertakings 

relating 

and 

to 

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; 

47 

OJ  L  375,  31.12.1985,  p. 3  ⌦ 302,  17.11.2009,  p.  32 ⌫  .  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). 

EN 

52 

   EN 

 
 
 
 
 
 
 
 
                                                 
investment  firm,  which  has  no 

2226)‘Branch’ means a place of business other than the head office which is a part of 
legal  personality  and  which  provides 
an 
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; 

(cid:208) 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; 

(cid:208) 2004/39/EC (adapted) 

2428)‘Parent undertaking’ means a parent undertaking as defined in Articles 1 and 2 
of 
on 
Directive 83/349/EEC 
consolidated accounts48; 

13 June 1983 

Seventh 

Council 

of 

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) 

(b) 

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

in  all 

the  cases 

'control'  which  means  the  relationship  between  a  parent  undertaking  and  a 
subsidiary, 
in  Article 1(1)  and (2)  of 
referred 
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,; 

to 

(c)  A  a  situation  in  which  two  or  more  natural  or  legal  persons  ⌦ they ⌫  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;. 

48 

OJ  L  193,  18.7.1983,  p. 1.  Directive  as 
European Parliament and of the Council (OJ L 178, 17.7.2003, p. 16). 

last  amended  by  Directive 2003/51/EC  of 

the 

EN 

53 

   EN 

 
 
 
 
 
 
 
 
 
                                                 
(cid:216) 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. 

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 2008/10/EC Art. 1.2(b) 
(cid:214) new 

32.  (cid:214) The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article  94  concerning  measures  to  In  order  to  take  account  of  developments  on  financial 
markets,  and  to  ensure  the  uniform application  of  this  Directive,  the  Commission(cid:206)1 ---  
may clarify (cid:214) specify some technical elements of  the definitions laid down in paragraph 1 
of this Article ⌦, to adjust them to market developments ⌫ .  

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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). 

(cid:208) 2008/10/EC Art. 1.2(b) 

(cid:208) 2004/39/EC 
(cid:214) 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 (cid:214) or an OTF , subject to the prior verification of their compliance with the 
provisions of this Chapter, excluding Articles 11 and 15. 

(cid:208) 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 Council49. 

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  ⌦ each ⌫  investment  firm  is 

49 

OJ L 331, 15.12.2010, p. 84. 

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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. 

(cid:208) 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 ⌦ Union ⌫ and shall allow an 
investment  firm  to  provide  the  services  or  perform  the  activities,  for  which  it  has  been 
authorised,  throughout  the Community ⌦ Union ⌫  ,  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. 

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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. 

4.  In  order  to  ensure  consistent  application  of  this  Article  and  of  Article 9(2)  to (4), 
Article 10(1)  and (2),  ESMA  may (cid:214) shall  develop draft  regulatory technical  standards to 
specify: 

(cid:208) 2010/78/EU Art. 6.2 (adapted) 
(cid:214) new 

(a) 

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

(cid:214) (b) the tasks of nomination committees required under Article 9 (2)  

(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). 

(cid:214) ESMA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by  [31 
December 2016].  

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. ⌫ In order to ensure uniform conditions of application of Article 7(2) and Article 9(2), 
ESMA may (cid:214) shall  develop draft implementing technical standards to determine standard 
forms, templates and procedures for the notification or provision of information provided for 
in those Articles ⌦ 7(2) and Article 9(5) ⌫ . 

(cid:214) 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 third ⌦ first ⌫ subparagraph in accordance with Article 15 of Regulation (EU) No 
1095/2010. 

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(cid:208) 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 
93/6/EEC 
compliance with 
⌦ 2006/49/EC ⌫ ; 

in  Directive 

conditions 

out 

the 

set 

(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. 

Every withdrawal of authorisation shall be notified to ESMA. 

(cid:208) 2010/78/EU Art. 6.3 

(cid:208) 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. 

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(cid:216) 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) 

(c) 

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. 

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 

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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. 

(a) 

(b) 

(c) 

(d) 

(e) 

ESMA shall develop draft regulatory standards to specify the following: 

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); 

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

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

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

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]. 

(cid:208) 2004/39/EC 
(cid:214) new 

52. Member States shall require the investment firm to notify the competent authority of (cid:214) all 
members  of  its  management  body  and  of   any  changes  to  its  membershipmanagement, 
along with all information needed to assess whether the(cid:214)firm complies with paragraphs 1, 2 
and 3 of this Article new staff appointed to manage the firm are of sufficiently good repute 
and sufficiently experienced. 

(cid:216) 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) 

(b) 

define, approve and oversee the strategic objectives of the firm, 

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 

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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. 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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 ⌦ the management body of the firm 
may ⌫  pose  a  threat  to  its  ⌦ effective, ⌫  sound  and  prudent  management  (cid:214) and  to  the 
adequate consideration of the interest of its clients and the integrity of the market  . 

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) 

(ii) 

alternative  arrangements  be  in  place  which  ensure  the  sound  and  prudent 
management  of  such  investment  firms.  (cid:214) and  the  adequate  consideration  of  the 
interest of clients and the integrity of the market; 

(cid:214) the  natural  persons  concerned  are  of  sufficiently  good  repute,  possess  sufficient 
knowledge,  skills  and  experience  and  commit  sufficient  time  to  perform  their 
duties.  

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 

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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. 

(cid:216) 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. 

(cid:208) 2007/44/EC Art. 3.2 (adapted) 

⌦ Article 11 ⌫ 

⌦ Notification of proposed acquisitions ⌫ 

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. 

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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 ⌦ Article 10 and 
in ⌫  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) 

(b) 

(c) 

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 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 

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. 

(cid:208) 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. 

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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  ⌦ Member  States  shall  require  that  competent  authorities  take  measures 
similar to those referred to in paragraph 3 of Article 10 ⌫ 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. 

(cid:208) 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. 

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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 ⌦ one of the 
following ⌫ : 

(a)  ⌦ a  natural  or  legal  person ⌫  situated  or  regulated  outside  the  Community 

⌦ Union ⌫ ; or 

(b) 

a  natural  or  legal  person  not  subject  to  supervision  under  this  Directive  or 
Directives  85/611/EEC,  92/49/EEC50,  2002/83/EC  ⌦ 2009/65/EC ⌫ 
, 
2005/68/EC51 ⌦ 2009/138/EC ⌫ or 2006/48/EC52. 

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. 

(cid:208) 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  ⌦ the  procedure  laid  down  in ⌫  Articles 10 
to 14 of Regulation (EU) No 1095/2010. 

50 

51 

52 

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). 
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. 
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. 

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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. 

(cid:208) 2007/44/EC Art. 3.3 
(cid:214) 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) 

(c) 

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

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, 
in 
other  Directives,  notably,  Directives  2002/87/EC  and  2006/49/EC, 
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 

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Article 64(2), may adopt implementing (cid:214) The Commission shall be empowered to adopt by 
means of delegated acts in accordance with Article 94 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. 

(cid:208) 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 schemes53 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 ⌦ 2006/49/EC ⌫ 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. 

53 

OJ L 84, 26.3.1997, p. 22. 

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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 ⌦ and in Article 17 ⌫ . 

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. 

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. 

(cid:208) 2004/39/EC 

(cid:216) new 

include 

telephone  conversations  or  electronic 
7.  Records  shall 
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. 

the  recording  of 

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. 

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(cid:208) 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. 

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. 

(cid:216) new 

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 2008/10/EC Art. 1.3(a) 
(cid:206)2 2008/10/EC Art. 1.3(b) 
(cid:214) 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  ⌦ and  7 ⌫  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 (cid:214) The Commission shall be 
empowered  to  adopt  delegated  acts  in  accordance  with  Article  94  concerning  measures 
to  adopt(cid:206)1 ---   implementing  measures  which  specify  the  concrete  organisational 
requirements  laid  down  in  paragraphs  2  to  9  to  be  imposed  on  investment  firms  (cid:214) and  on 
branches  of  third  country  firms  authorised  in  accordance  with  article  43   performing 
different investment services and/or activities and ancillary services or combinations thereof. 
(cid:206)2 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).  

(cid:216) 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 

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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.  

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(cid:208) 2004/39/EC 
(cid:214) new 

Article 1814 

Trading process and finalisation of transactions in an MTF (cid:214) and an OTF  

1. Member States shall require that investment firms or market operators operating an MTF 
(cid:214) or an OTF  , 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.  (cid:214) 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.   

2. Member States shall require that investment firms or market operators operating an MTF 
(cid:214) or an OTF  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 (cid:214) or an OTF  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  (cid:214) or  an  OTF   establish  (cid:214) , 
publish  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 
(cid:214) or an OTF  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  (cid:214)  or  an  OTF   have  put  in  place  the  necessary 
arrangements  to  facilitate  the  efficient  settlement  of  the  transactions  concluded  under  the 
systems of the MTF (cid:214) or an OTF . 

5. Where a transferable security, which has been admitted to trading on a regulated market, is 
also traded on an MTF (cid:214) or an OTF  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 (cid:214) or an OTF . 

6. Member States shall require that any investment firm or market operator operating an MTF 
(cid:214) or  an  OTF   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. 

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(cid:216) 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 

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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. 

(cid:208) 2004/39/EC 

Article 15 

Relations with third countries 

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. 

(cid:208) 2010/78/EU Art. 6.5(a) 

(cid:208) 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. 

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(cid:208) 2004/39/EC 
(cid:206)1 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, (cid:206)1 in 
accordance with the regulatory procedure referred to in Article 64(3),  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, (cid:206)1 in  accordance  with 
the regulatory procedure referred to in Article 64(3),  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. 

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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. 

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

(cid:208) 2010/78/EU Art. 6.6 

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 2008/10/EC Art. 1.5(a) 
(cid:214) 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. 

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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  ⌦ appropriate ⌫  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 
the  Commission  shall  adopt(cid:206)1 ---  
uniform  application  of  paragraphs 1  and  2, 
implementing (cid:214) The Commission shall be empowered to adopt by means of delegated acts in 
accordance with Article 94 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. 

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). 

(cid:208) 2008/10/EC Art. 1.5(b) 

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(cid:208) 2004/39/EC (adapted) 
(cid:214) new 

SECTION 2 

PROVISIONS TO ENSURE INVESTOR PROTECTION 

Article 2419 

Conduct of business obligations when providing investment services to clients 
⌦ General principles and information to clients ⌫ 

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 ⌦ this Article and in Article 25 ⌫ . 

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;,  (cid:214) 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,  

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. 

⌦ The  information  referred  to  in  the  first  subparagraph  should  be  provided  in  a 
comprehensible form in such a manner ⌫ so that they ⌦ clients or potential clients ⌫ 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. 

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(cid:208) 2004/39/EC (adapted) 
(cid:214) 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  (cid:214) Union   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 (cid:214) paragraphs 2 and 3 . 

(cid:216) 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. 

(cid:216) 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. 

(cid:216) 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) 

(b) 

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; 

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

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(c) 

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

(cid:208) 2004/39/EC (adapted) 

⌦ Article 25 ⌫ 

⌦ Assessment of suitability and appropriateness and reporting to clients ⌫ 

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. 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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 ⌦ Where ⌫ 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 ⌦ is  not  in  a 
position ⌫  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 (cid:214) , with the exclusion of the ancillary service specified in Section B (1) of 
Annex 1 , 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: 

a)- 

the  services  referred  to  in  the  introductory  part  relate  to(cid:214) any  of  the  following 
financial instruments:  

(cid:208) 2010/78/EU Art. 6.7 (adapted) 
(cid:214) new 

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(i) 
shares  admitted  to  trading  on  a  regulated  market  or  onin  an  equivalent  third-
country market, (cid:214) 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;  

(ii)  (cid:214) 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;  

(iii)  money market instruments, bonds or other forms of securitised debt (excluding 
those bonds or securitised debt (cid:214) excluding those  that embed a derivative), (cid:214) or 
incorporate a structure which makes it difficult for the client to understand the risk 
involved;  

(iv)  (cid:214) shares or units in  UCITS and (cid:214) excluding structured UCITS as referred 
to in Article 36 paragraph 1 subparagraph 2 of Commission Regulation 583/2010;  

other  non-complex  financial 

(v) 
paragraph . 

instruments  (cid:214) for 

the  purpose  of 

this 

(cid:214) 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  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, 

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 2008/10/EC Art. 1.6(a) 
(cid:214) new 

b)- 

c)- 

the service is provided at the initiative of the client or potential client, 

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  (cid:214) or 
appropriateness  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  (cid:214) include  periodic  communications  to  clients,  taking  into 

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account the type and the complexity of financial instruments involved and the nature of the 
service provided to the client and shall  include, where applicable, the costs associated with 
the  transactions  and  services  undertaken  on  behalf  of  the  client.  (cid:214) When  providing 
investment advice, the investment firm shall specify how the advice given meets the personal 
characteristics of the client.  

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  adopt(cid:206)1 ---   implementing  measures  (cid:214) The 
Commission  shall  be  empowered  to  adopt  by  means  of  delegated  acts  in  accordance  with 
Article  94  measures  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) 

(b) 

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; 

the nature of the productsfinancial instruments being offered or considered (cid:214) , 
including different types of financial instruments and banking deposits referred 
to in Article 1 (2)  ; 

(c) 

the  retail  or  professional  nature  of  the  client  or  potential  clients  (cid:214) or,  in  the 
case of paragraphs 5, their classification as eligible counterparties.  

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). 

(cid:208) 2008/10/EC Art. 1.6(b) 

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). 

(cid:216) new 

(cid:208) 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 

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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. 

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. 

(cid:216) new 

(cid:208) 2004/39/EC 
(cid:206)1 2008/10/EC Art. 1.7(a) 
(cid:214) 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. (cid:214) 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 

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the firm for the client.  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 (cid:214), MTF or OTF  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 (cid:214) MTF or OTF  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. 

(cid:214) 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.  

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 
shall(cid:206)1 ---   adopt  implementing  (cid:214) The  Commission  shall  be  empowered  to  adopt 
delegated acts in accordance with Article 94  measures concerning: 

(a) 

(b) 

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; 

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. 

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

(cid:216) new 

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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. 

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). 

(cid:208) 2008/10/EC Art. 1.7(b) 

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 2008/10/EC Art. 1.8(a) 
(cid:214) 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) ⌦ 4 of Regulation (EU) No …/… [MiFIR] ⌫ . 

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 adopt(cid:206)1 ---  

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implementing (cid:214) The Commission shall be empowered to adopt delegated acts in accordance 
with Article 94 concerning  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. 

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). 

(cid:208) 2008/10/EC Art. 1.8(b) 

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 2010/78/EU Art. 6.8 
(cid:206)2 2008/10/EC Art. 1.9(a) 
(cid:214) 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. (cid:214) Member States shall prohibit tied agents registered in their 
territory from handling clients' money and/or financial instruments.  

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. 

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3.  (cid:206)1 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.  

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  (cid:214) (with  the  exception  of  paragraph  3),  25  (with  the 
exception  of  paragraph  5) ,  2721  and  28(1)22(1)  in  respect  of  those  transactions  or  in 
respect of any ancillary service directly related to those transactions. 

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(cid:214) 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.  

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 ⌦ Union ⌫  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  (cid:214) at  national  level   ,  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, ⌦ 25, ⌫ 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  adopt(cid:206)2 ---   implementing  (cid:214) The  Commission  shall  be  empowered  to  adopt 
delegated acts in accordance with Article 94 to specify  measures which define: 

(a) 

the procedures for requesting treatment as clients under paragraph 2; 

(b) 

(c) 

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

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

requirements, 

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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). 

(cid:208) 2008/10/EC Art. 1.9(b) 

(cid:208) 2004/39/EC 

SECTION 3 

MARKET TRANSPARENCY AND INTEGRITY 

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

Article 25 

(cid:208) 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. 

(cid:208) 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. 

54 

OJ L 96, 12.4.2003, p. 16. 

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(cid:208) 2004/39/EC 
(cid:206)1 2008/10/EC Art. 1.10(a) 
(cid:206)2 2008/10/EC Art. 1.10(b) 
(cid:214) 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  adopt(cid:206)1 ---   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. (cid:206)2 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).  

Article 3126 

Monitoring of compliance with the rules of the MTF (cid:214) or the OTF  and with other 
legal obligations 

1. Member States shall require that investment firms and market operators operating an MTF 
(cid:214) or  OTF   establish  and  maintain  effective  arrangements  and  procedures,  relevant  to  the 
MTF (cid:214) or OTF  , for the regular monitoring of the compliance by its users (cid:214) or clients  
with theirits rules. Investment firms and market operators operating an MTF (cid:214) or an OTF  

EN 

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shall monitor the transactions undertaken by their users (cid:214) or clients  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 (cid:214) or 
an  OTF   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 (cid:214) or an OTF  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. 

(cid:216) 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. 

EN 

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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. 

(cid:208) 2004/39/EC 

Article 27 

Obligation for investment firms to make public firm quotes 

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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. 

(cid:208) 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. 

(cid:208) 2004/39/EC 
(cid:206)1 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. 

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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 shall(cid:206)1 ---  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: 

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(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. 

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). 

(cid:208) 2008/10/EC Art. 1.11(b) 

(cid:208) 2004/39/EC 
(cid:206)1 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. 

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3.  In  order  to  ensure  the  transparent  and  orderly  functioning  of  markets  and  the  uniform 
application  of  paragraph 1,  the  Commission  shall  adopt(cid:206)1 ---   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. 

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). 

(cid:208) 2008/10/EC Art. 1.12(b) 

(cid:208) 2004/39/EC 
(cid:206)1 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 shall(cid:206)1 -
--  adopt implementing measures as regards: 

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(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. 

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). 

(cid:208) 2008/10/EC Art. 1.13(b) 

(cid:208) 2004/39/EC 
(cid:206)1 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 shall(cid:206)1 ---  adopt 
implementing measures in respect of: 

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

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(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. 

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). 

(cid:208) 2008/10/EC Art. 1.14(b) 

(cid:216) new 

SECTION 4 

SME MARKETS 

Article 35 

SME growth markets 

Member  States  shall  provide  that  the  operator  of  a  MTF  may  apply  to  its  home 

1. 
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. 

The MTF shall be subject to effective rules, systems and procedures which ensure that 

3. 
the following is complied with: 

(a) 

(b) 

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

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 

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applicable  in  respect  of  a  public  offer  being  made  in  conjunction  with  the 
admission to trading; 

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

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; 

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

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]. 

(d) 

(e) 

(f) 

(g) 

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. 

Member States shall require that where a financial instrument of an issuer is admitted 
7. 
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. 

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(cid:208) 2004/39/EC (adapted) 
(cid:214) 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 ⌦ 2006/48/EC ⌫  , 
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.  (cid:214) 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.  

(cid:208) 2010/78/EU Art. 6.11(a) 
(cid:214) 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 (cid:214) , 
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  investment  firm  intends  to  use  (cid:214) to 
provide  services   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. 

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(cid:208) 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. 

(cid:216) 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. 

(cid:208) 2004/39/EC 
(cid:214) new 

65.  Member  States  shall,  without  further  legal  or  administrative  requirement,  allow 
investment firms and market operators operating MTFs (cid:214) and OTFs  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. 

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(cid:208) 2010/78/EU Art. 6.11(b) 
(adapted) 
(cid:214) new 

87.  In  order  to  ensure  consistent  application  of  this  Article,  ESMA  may  (cid:214) shall   develop 
draft  regulatory  technical  standards  to  specify  the  information  to  be  notified  in  accordance 
with paragraphs 2, 4 and 76. 

(cid:214) ESMA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by  [31 
December 2016].  

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. 

(cid:214) 9.   ESMA  may  (cid:214) shall   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. 

(cid:214) 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  firstthird  subparagraph  in  accordance  with  Article 15  of  Regulation  (EU)  No 
1095/2010.  

(cid:208) 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 ⌦ 2006/48/EC ⌫ 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; 

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(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 ⌦ and the identity of those tied agents ⌫ ; 

(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. 

(cid:216) 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. 

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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. 

(cid:208) 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, ⌦ 25, ⌫ 2721, 2822, 25, 27 and 28 ⌦ of 
this  Directive  and  Articles  13  to  23  of  Regulation  (EU)  No  …/…  [MiFIR]  and ⌫  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,  ⌦ 25, ⌫ 
2721, 2822, 25, 27 and 28 ⌦ of this Directive and Articles 13 to 23 of Regulation (EU) No 
…/… [MiFIR] ⌫ 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. 

(cid:208) 2010/78/EU Art. 6.12 (adapted) 
(cid:214) new 

1110. In order to ensure consistent application of this Article, ESMA may (cid:214) shall  develop 
draft  regulatory  technical  standards  to  specify  the  information  to  be  notified  in  accordance 
with paragraphs 2, 4 and 109. 

(cid:214) ESMA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by  [31 
December 2016].   

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 ⌫ Articles 10 to 14 
of Regulation (EU) No 1095/2010. 

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In  order  to  ensure  uniform  conditions  of  application  of  this  Article,  (cid:214) 12.   ESMA  may 
(cid:214) shall   develop  draft  implementing  technical  standards  to  establish  standard  forms, 
templates and procedures for the transmission of information in accordance with paragraphs 3 
and 109. 

(cid:214) 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  firstthird  subparagraph  in  accordance  with  Article 15  of  Regulation  (EU)  No 
1095/2010. 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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 
(cid:214) or OTF  in their territory. 

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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 ⌦ the following conditions ⌫ : 

(a) 

(b) 

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 

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. 

EN 

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(cid:216) 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) 

(c) 

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;  

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 

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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) 

(b) 

(c) 

(d) 

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

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; 

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

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 

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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) 

(b) 

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; 

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) 

(b) 

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

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.  

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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) 

(b) 

(c) 

(d) 

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; 

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

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

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]. 

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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; 

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(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. 

(cid:208) 2004/39/EC 

TITLE III 

REGULATED MARKETS 

(cid:208) 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 

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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. 

6. ESMA shall be notified of any withdrawal of authorisation.. 

(cid:208) 2010/78/EU Art. 6.13 

(cid:208) 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. 

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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. 

(cid:216) 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) 

(c) 

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. 

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. 

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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) 

(b) 

(c) 

(d) 

(e) 

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); 

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

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

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

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. 

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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. 

(cid:208) 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) 

(b) 

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; 

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; 

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(b) 

(c) 

(d) 

(e) 

(f) 

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; 

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; 

 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; 

to have effective arrangements to facilitate the efficient and timely finalisation 
of the transactions executed under its systems; 

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. 

(cid:216) 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 

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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.  

Member States shall require a regulated market to ensure that its rules on co-location 

5. 
services and fee structures are transparent, fair and non-discriminatory.  

Member  States  shall  require  that  upon  request  by  the  competent  authority  for  a 
6. 
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.  

The  Commission  shall  be  empowered  to  adopt  delegated  acts  in  accordance  with 

7. 
Article 94 concerning the requirements laid down in this Article, and in particular: 

(a) 

(b) 

(c) 

(d) 

(e) 

to  ensure  trading  systems  of  regulated  markets  are  resilient  and  have  adequate 
capacity; 

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; 

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; 

to establish controls concerning direct electronic access; 

to ensure co-location services and fee structures are fair and non-discriminatory. 

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 Corrigendum, OJ L 045, 
16.2.2005, p. 18 
(cid:206)2 2008/10/EC Art. 1.15(a) 
(cid:214) 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. 

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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  ⌦ Union ⌫  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 ⌦ Union ⌫ 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 of(cid:206)1 4 November 2003  on the prospectus to be 
published  when  securities  are  offered  to  the  public  or  admitted  to  trading  and  amending 
Directive 2001/34/EC55. 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 shall(cid:206)2 ---
   adopt  implementing  (cid:214) The  Commission  shall  adopt  by  means  of  delegated  acts  in 
accordance with Article 94  measures which: 

(a) 

(b) 

(c) 

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; 

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 
its  obligations  under  Community 
transferable  security  complies  with 
⌦ Union ⌫  law  in  respect  of  initial,  ongoing  or  ad  hoc  disclosure 
obligations; 

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 ⌦ Union ⌫ law. 

55 

(cid:206)1 OJ L 345, 31.12.2003, p. 64.  

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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). 

(cid:208) 2008/10/EC Art. 1.15(b) 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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  (cid:214) ,  communicates  it  to  other  regulated  markets,  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 ⌦ of  this ⌫  .(cid:214) 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.  

(cid:208) 2010/78/EU Art. 6.14 (adapted) 
(cid:214) new 

2. A competent authority which requests the suspension or removal of a financial instrument 
from trading on one or more regulated markets (cid:214) MTFs or OTFs  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 (cid:214) and OTFs  that operate under their supervision. 

EN 

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(cid:216) 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) 

(b) 

disorderly trading conditions; 

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. 

(cid:208) 2004/39/EC (adapted) 
(cid:214) new 

Article 5542 

Access to the regulated market 

EN 

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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) 

(e) 

the  conditions  established,  for  members  or  participants  other  than  investment 
firms and credit institutions, under paragraph 3; 

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  ⌦ 2006/48/EC ⌫  and  other  persons 
who: 

(a) 

are of sufficient good reputefit and proper; 

(b) 

 have  a  sufficient 
experience ⌫ ; 

level  of 

trading  ability,  and  competence  ⌦ and 

(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,  ⌦ 25, ⌫  2721  and  2822.  However,  the  members  or  participants  of  the 
regulated  market  shall  apply  the  obligations  provided  for  in  Articles 2419, ⌦ 25, ⌫  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. 

EN 

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   EN 

 
(cid:208) 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. 

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 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  ⌦ an 
oders ⌫ 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 

EN 

122 

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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 shall(cid:206)1 -
--  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. 

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). 

(cid:208) 2008/10/EC Art. 1.16(b) 

(cid:208) 2004/39/EC 
(cid:206)1 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 

EN 

123 

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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 shall(cid:206)1 ---  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. 

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). 

(cid:208) 2008/10/EC Art. 1.17(b) 

(cid:208) 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. 

EN 

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(cid:208) 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. 

(cid:216) 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 

EN 

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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. 

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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) 

(b) 

 investment  firms  as  defined  in  Directive  2004/39/EC  or  credit  institution  as 
defined in Directive 2006/48/EC; 

 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. 

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(cid:216) 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.  

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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 

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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. 

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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. 

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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) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

the identifier of the financial instrument;  

the price at which the transaction was concluded; 

the volume of the transaction; 

the time of the transaction; 

the time the transaction was reported; 

the price notation of the transaction; 

the trading venue the transaction was executed on or otherwise the code "OTC"; 

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) 

(b) 

(c) 

(d) 

(e) 

the identifier or identifying features of the financial instrument;  

the price at which the transaction was concluded; 

the volume of the transaction; 

the time of the transaction; 

the time the transaction was reported; 

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(f) 

(g) 

(h) 

the price notation of the transaction; 

the trading venue the transaction was executed on or otherwise the code "OTC"; 

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.  

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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. 

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(cid:208) 2004/39/EC 

TITLE VIIV 

COMPETENT AUTHORITIES 

CHAPTER I 

DESIGNATION, POWERS AND REDRESS PROCEDURES 

Article 6948 

Designation of competent authorities 

(cid:208) 2010/78/EU Art. 6.17(a) 
(cid:214) new 

1. Each Member State shall designate the competent authorities which are to carry out each of 
the  duties  provided  for  in(cid:214) under  the  different  provisions  of  Regulation  (EU)  No  …/… 
(MiFIR) and of this 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. 

(cid:208) 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. 

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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. 

(cid:208) 2010/78/EU Art. 6.17(b) 

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. 

(cid:208) 2010/78/EU Art. 6.17(c) 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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: 

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(a)  have  access  to  any  document  in  any  form  whatsoever  ⌦ which  would  be 
relevant for the performance of the supervisory duties ⌫ 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  (cid:214) 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;   

require the cessation of any practice that is contrary to the provisions adopted 

(e) 
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; 

adopt  any  type  of  measure  to  ensure  that  investment  firms  and  regulated 

(i) 
markets continue to comply with legal requirements; 

(j) 

require the suspension of trading in a financial instrument; 

require  the  removal  of  a  financial  instrument  from  trading,  whether  on  a 

(k) 
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. 

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(cid:216) 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) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

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; 

request the freezing and/or the sequestration of assets; 

adopt  any  type  of  measure  to  ensure  that  investment  firms  and  regulated  markets 
continue to comply with legal requirements; 

require the suspension of trading in a financial instrument; 

require  the  removal  of  a  financial  instrument  from  trading,  whether  on  a  regulated 
market or under other trading arrangements; 

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; 

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. 

(cid:208) 2004/39/EC 
(cid:214) 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  (cid:214) their  competent  authorities  may   take  the  appropriate 
administrative  (cid:214) sanctions  and   measures  can  be  taken  or  administrative  sanctions  be 
imposed against the persons responsible where the provisions (cid:214) of Regulation (EU) No …/… 
(MiFIR)  or  the  national  provisions   adopted  in  the  implementation  of  this  Directive  have 

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not  been  complied  with.  (cid:214) ,  and   shall  ensure  that  (cid:214) they  are  applied.   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. 

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. 

(cid:216) new 

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. 

(cid:208) 2004/39/EC 

(cid:208) 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). 

(cid:216) 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 

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1. This Article shall apply to the following:  

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

(k) 

(l) 

performing investment services or activities as a regular occupation or business on a 
professional basis without obtaining authorisation in breach of Article 5; 

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); 

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); 

an investment firm having obtained an authorisation through false statements or any 
other irregular means in breach of Article 8(b); 

an  investment  firm  failing  to  comply  with  requirements  applicable  to  the 
management body in accordance with Article 9(1); 

the  management  body  of  an  investment  firm  failing  to  perform  its  duties  in 
accordance with Article 9(6); 

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);  

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); 

an investment firm failing to have in place an organisational requirement imposed in 
accordance with the national provisions implementing Article 16 and 17; 

an  investment  firm  failing  to  identify,  prevent,  manage  and  disclose  conflicts  of 
interests in accordance with the national provisions implementing Article 23; 

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;  

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;  

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(m) 

(n) 

(o) 

(p) 

(q) 

(r) 

(s) 

(t) 

(u) 

(v) 

(w) 

(x) 

(y) 

(z) 

an investment firm accepting or receiving fees, commissions or any monetary benefit 
in contravention of the national provisions implementing Article 19 (5) and (6);  

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; 

operating a regulated market without obtaining authorisation in breach of Article 47; 

the management body of a market operator failing to perform its duties in accordance 
with Article 48(6); 

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; 

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; 

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]; 

an investment firm repeatedly failing to make public information in accordance with 
Articles 13, 17, 19 and 20 of Regulation (EU) No …/… [MiFIR]; 

an investment firm repeatedly failing to report transactions to competent authorities 
in accordance with Article 23 of Regulation (EU) No …/… [MiFIR]; 

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];  

a  central  counterparty  failing  to  grant  access  to  its  clearing  services  in  accordance 
with Article 28 of Regulation (EU) No …/… [MiFIR]; 

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]; 

a person with proprietary rights to benchmarks failing to grant access to a benchmark 
in accordance with Article 30 of Regulation (EU) No …/… [MiFIR]; 

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; 

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(b) 

(c) 

(d) 

(e) 

(f) 

an order requiring the natural or legal person to cease the conduct and to desist from 
a repetition of that conduct;  

in  case  of  an  investment  firm,  withdrawal  of  the  authorisation  of  the  institution  in 
accordance with Article 8; 

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; 

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; 

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) 

b) 

c) 

d) 

e) 

f) 

the gravity and the duration of the breach; 

the degree of responsibility of the responsible natural or legal person;  

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; 

the importance of profits gained or losses avoided by the responsible natural or legal 
person, insofar as they can be determined; 

the losses for third parties caused by the breach, insofar as they can be determined; 

the level of cooperation of the responsible natural or legal person with the competent 
authority; 

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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) 

(b) 

(c) 

specific procedures for the receipt of reports and their follow-up;  

appropriate protection for employees of financial institutions who denounce breaches 
committed within the financial institution;  

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]. 

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(cid:208) 2004/39/EC (adapted) 
(cid:214) new 

Article 7952 

Right of appeal 

1. Member States shall ensure that any decision taken (cid:214) under the provisions of Regulation 
(EU) No …/… (MiFIR) or  under laws, regulations or administrative provisions adopted in 
accordance  with  this  Directive  is  properly reasoned  and  is  subject  to  the  right ⌦ of  appeal 
before  a  tribunal ⌫  to  apply  to  the  courts.  The  right ⌦ of  appeal  before  a  tribunal ⌫  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, ⌦ also ⌫ may, in the interests of consumers and in accordance with national 
law,  take  action  before  the  courts  or  competent  administrative  bodies  to  ensure  that 
(cid:214) Regulation (EU) No …/… [MiFIR] and  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  (cid:214) ensure   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.  (cid:214) Member  States  shall  further  ensure  that  all 
investment firms adhere to one or more such bodies implementing such complaint and redress 
procedures.  

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 (cid:214) actively 
cooperate  with  their  counterparts  in  other  Member  States  in  the  resolution  of  cross-border 
disputes.  

3.  The  competent  authorities  shall  notify  ESMA  of  the  complaint  and  redress  procedures 
referred to in paragraph 1 which are available under its jurisdictions. 

(cid:208) 2010/78/EU Art. 6.19 

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ESMA shall publish and keep up-to-date a list of all extra-judicial mechanisms on its website. 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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.  ⌦ They  shall  not  divulge  any ⌫  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 ⌦ requirements of national ⌫ 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 ⌦ requirements  of  national ⌫  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. 

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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 documents56, 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  companies57,  Article 37  of 
Directive 83/349/EEC  or  Article 7331  of  Directive 85/611/EEC  ⌦ 2009/65/EC ⌫  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 

COOPERATION BETWEEN THE COMPETENT AUTHORITIES OF 
THE MEMBER STATES AND WITH ESMA 

(cid:208) 2010/78/EU Art. 6.20 

(cid:208) 2004/39/EC 

Article 8356 

Obligation to cooperate 

56 
57 

OJ L 126, 12.5.1984, p. 20. 
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). 

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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. 

(cid:208) 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. 

(cid:208) 2004/39/EC 
(cid:214) new 

2. When, taking into account the situation of the securities markets in the host Member State, 
the  operations  of  a  regulated  market  (cid:214) an  MTF,  or  an  OTF   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. 

(cid:208) 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. 

5.  Without  prejudice  to  paragraphs  1  and  4,  competent  authorities  shall  notify  ESMA  and 
other competent authorities of the details of: 

(cid:216) new 

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(a) 

(b) 

any  requests  to  reduce  the  size  of  a  position  or  exposure  pursuant  to  Article 
72(1) (f); 

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.  

(cid:208) 2004/39/EC 
(cid:206)1 2008/10/EC Art. 1.18(a) 
(cid:206)2 2008/10/EC Art. 1.18(b) 
(cid:214) new 

75. In order to ensure the uniform application of paragraph 2 the Commission may adopt(cid:206)1 -
--   implementing  (cid:214) The  Commission  shall  be  empowered  to  adopt  delegated  acts  in 
accordance with Article 94 concerning  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.  (cid:206)2 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).  

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(cid:208) 2010/78/EU Art. 6.21(c) 
(adapted) 
(cid:214) new 

76. In order to ensure uniform conditions of application of this Article, ESMA may (cid:214) shall  
develop  draft  implementing  technical  standards  to  establish  standard  forms,  templates  and 
procedures for the cooperation arrangements referred to in paragraph 2. 

(cid:214) 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. 

(cid:208) 2004/39/EC (adapted) 
(cid:206)1 2010/78/EU Art. 6.22(a) 

Article 8457 

(cid:206)1 1.   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. 

(cid:208) 2010/78/EU Art. 6.22(b) 
(adapted) 
(cid:214) 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  (cid:214) shall   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. 

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(cid:214) ESMA  shall  submit  those  draft  regulatory  technical  standards  to  the  Commission  by  [31 
December 2016].  

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,  (cid:214) 4.   ESMA  may 
(cid:214) shall   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. 

(cid:214) 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  firstthird  subparagraph  in  accordance  with  Article 15  of  Regulation  (EU)  No 
1095/2010. 

(cid:208) 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-

EN 

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   EN 

 
 
regard 

consolidated or consolidated basis, of the conduct of that business, especially 
imposed  by 
with 
Directive 93/6/EEC,  administrative  and  accounting  procedures  and  internal-
control mechanisms; 

requirements 

adequacy 

capital 

the 

to 

(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. 

(cid:208) 2010/78/EU Art. 6.23(a) 
(adapted) 
(cid:214) new 

4.  In  order  to  ensure  uniform  conditions  of  application  of  paragraphs 1  and 2,  ESMA  may 
(cid:214) shall   develop  draft  implementing  technical  standards  to  establish  standard  forms, 
templates and procedures for the exchange of information. 

(cid:214) 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. 

(cid:208) 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. 

(cid:208) 2010/78/EU Art. 6.24 (adapted) 

Article 86 

Binding mediation 

⌦ 1. ⌫ 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: 

EN 

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(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. 

⌦ 2. ⌫  In  the  situations  referred  to  in  the  first  paragraph  ⌦ 1 ⌫  ,  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. 

(cid:208) 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. 

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. 

(cid:208) 2010/78/EU Art. 6.25 

(cid:208) 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 ⌦ one of the following ⌫ : 

(a) 

a  subsidiary  of  an  investment  firm  or  credit  institution  authorised  in  another 
Member State; or 

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(b) 

(c) 

a  subsidiary  of  the  parent  undertaking  of  an  investment  firm  or  credit 
institution authorised in another Member State; or 

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) 

(b) 

(c) 

a  subsidiary  of  a  credit  institution  or  insurance  undertaking  authorised  in  the 
Community ⌦ Union ⌫ ; or 

a  subsidiary  of  the  parent  undertaking  of  a  credit  institution  or  insurance 
undertaking authorised in the Community ⌦ Union ⌫ ; or 

controlled by the same person, whether natural or legal, who controls a credit 
institution  or 
the  Community 
⌦ Union ⌫ . 

insurance  undertaking  authorised 

in 

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. 

(cid:208) 2010/78/EU Art. 6.26 (adapted) 
(cid:214) new 

4.  In  order  to  ensure  uniform  conditions  of  application  of  paragraphs 1  and 2,  ESMA  may 
(cid:214) shall   develop  draft  implementing  technical  standards  to  establish  standard  forms, 
templates and procedures for the consultation of other competent authorities prior to granting 
an authorisation. 

(cid:214) 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. 

(cid:208) 2004/39/EC 
(cid:214) new 

Article 8961 

Powers for host Member States 

EN 

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   EN 

 
 
 
1.  Host  Member  States  (cid:214) shall  provide  that  the  competent  authority   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  (cid:214) shall 
provide that the competent authority  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. 

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: 

(cid:208) 2010/78/EU Art. 6.27(a) 

(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. 

(cid:208) 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. 

EN 

154 

   EN 

 
 
 
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. 

(cid:208) 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:  ⌦ competent  authority  of  the  host  Member 
State  shall, ⌫  (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. 

(cid:208) 2004/39/EC 
(cid:214) new 

3. Where the competent authority of the host Member State of a regulated market, or an MTF 
(cid:214) or OTF  has clear and demonstrable grounds for believing that such regulated market, or 
MTF  (cid:214) or  OTF   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 (cid:214) or OTF  . 

(cid:208) 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: ⌦ the competent authority of the 
host Member State shall, ⌫ (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. 

EN 

155 

   EN 

 
 
 
 
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. 

(cid:208) 2004/39/EC 

(cid:208) 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. 

(cid:208) 2004/39/EC 

CHAPTER III 

COOPERATION WITH THIRD COUNTRIES 

Article 9263 

Exchange of information with third countries 

(cid:208) 2010/78/EU Art. 6.29 (adapted) 
(cid:214) new 

1.  Member  States  and  in  accordance  with  Article 33  of  Regulation  (EU)  No  1095/2010, 
ESMA  ⌦ , ⌫  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 (cid:214) Transfer  personal data to a third country (cid:214) by a 
Member State shall be  in accordance with Chapter IV of Directive 95/46/EC. 

(cid:214) Transfers of personal data to a thrid country by ESMA shall be in accordance with Article 
9 of Regulation (EU) No 45/2001.  

EN 

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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) 

(b) 

(c) 

the  supervision  of  credit  institutions,  other  financial  institutions,  insurance 
undertakings and the supervision of financial markets; 

the  liquidation  and  bankruptcy  of  investment  firms  and  other  similar 
procedures; 

the  carrying  out  of  statutory  audits  of  the  accounts  of  investment  firms  and 
other  financial  institutions,  credit  institutions  and  insurance  undertakings,  in 
their  supervisory  functions,  or  which  administer 
the  performance  of 
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.  (cid:214) 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.  

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. 

(cid:208) 2004/39/EC 

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TITLE VIIV 

(cid:216) 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. 

4. 

5. 

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. 

As soon as it adopts a delegated act, the Commission shall notify it simultaneously to 
the European Parliament and to the Council.  

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. 

EN 

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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/EC58. That committee shall be a committee within the meaning of Regulation (EU) 
No 182/201159. 

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 

(cid:208) 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/EC60 (hereinafter referred to as ‘the Committee’). 

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. 

(cid:208) 2008/10/EC Art. 1.20(a) 

2a. None of the implementing measures enacted may change the essential provisions of this 
Directive. 

(cid:208) 2006/31/EC Art. 1.2(a) 

58 
59 
60 

OJ L 191, 13.7.2001, p.45. 
OJ L 55, 28.2.2011, p.13. 
OJ L 191, 13.7.2001, p. 45. 

EN 

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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. 

(cid:208) 2008/10/EC Art. 1.20(b) 

(cid:208) 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. 

(cid:208) 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. 

(cid:208) 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. 

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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. 

(cid:216) 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) 

(b) 

(c) 

(d) 

(e) 

(f) 

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; 

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; 

the impact of requirements regarding automated and high-frequency trading; 

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; 

the  impact  of  the  application  or  limits  or  alternative  arrangements  on  liquidity, 
market abuse and orderly pricing and settlement conditions in commodity derivatives 
markets; 

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 

EN 

161 

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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  

(cid:208) 2004/39/EC 
(cid:206)1 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 (cid:206)1 Directive 2004/39/EC of the European Parliament and 
of the Council of 21 April 2004 on markets in financial instruments 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 (cid:206)1 Directive 2004/39/EC of the European Parliament and of the Council of 
21  April  2004  on  markets  in  financial  instruments    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: 

61 
62 

(cid:206)1 OJ L 145, 30.4.2004, p. 1.  
(cid:206)1 OJ L 145, 30.4.2004, p. 1.  

EN 

162 

   EN 

 
 
 
 
 
 
 
 
                                                 
‘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 mediation63. 

(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  (cid:206)1 Directive 
2004/39/EC  of  the  European  Parliament  and  of  the  Council  of  21  April  2004  on  markets  in 

63 

OJ L 9, 15.1.2003, p. 3. 

EN 

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   EN 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
financial instruments 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.’» 

(cid:208) 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. 

(cid:208) 2004/39/EC 

Article 9770 

Transposition 

(cid:216) 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.  

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. 

(cid:208) 2006/31/EC Art. 1.5 

64 

(cid:206)1 OJ L 145, 30.4.2004, p. 1.  

EN 

164 

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They shall apply these measures from 1 November 2007. 

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. 

(cid:208) 2004/39/EC 

Article 71 

Transitional provisions 

(cid:208) 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. 

(cid:208) 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. 

EN 

165 

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(cid:216) 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. 

(cid:208) 2004/39/EC (adapted) 

Article 10072 

Entry into force 

This Directive shall enter into force on the day of ⌦ twentieth day following that of ⌫ its 
publication in the Official Journal of the European Union. 

Article 10173 

Addressees 

This Directive is addressed to the Member States. 

EN 

166 

   EN 

 
 
 
LIST OF SERVICES AND ACTIVITIES AND FINANCIAL INSTRUMENTS 

ANNEX I 

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;. 

(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. 

(cid:216) new 

(cid:208) 2004/39/EC (adapted) 
(cid:214) 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; 

EN 

167 

   EN 

 
 
 
(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,  (cid:214) emission  allowances   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 (cid:214), OTF,  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 

EN 

168 

   EN 

 
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 (cid:214), OTF,  or an MTF, are cleared and settled through recognised clearing houses or 
are subject to regular margin calls. 

(11)  Emission  allowances  consisting  of  any  units  recognised  for  compliance  with  the 
requirements of Directive 2003/87/EC (Emissions Trading Scheme)  

(cid:216) new 

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. 

(cid:208) 2004/39/EC (adapted) 
(cid:214) new 

EN 

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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. 

EN 

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(3) 

 National  and  regional  governments,  ⌦ including ⌫  public  bodies  that 
manage  public  debt  ⌦ at  national  or  regional  level ⌫  ,  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 ⌦ local public 
authorities, municipalities ⌫ 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. 

EN 

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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. 

(cid:214) 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.  

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. 

EN 

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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

EN 

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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 structure65  

Internal Market – Financial markets 

1.3. 

Nature of the proposal/initiative  

⌧ The proposal/initiative relates to a new action  

(cid:133)  The  proposal/initiative  relates  to  a  new  action  following  a  pilot  project/preparatory 
action66  

(cid:133) The proposal/initiative relates to the extension of an existing action  

(cid:133) 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; 

65 
66 

ABM: Activity-Based Management – ABB: Activity-Based Budgeting. 
As referred to in Article 49(6)(a) or (b) of the Financial Regulation. 

EN 

174 

   EN 

 
                                                 
-  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; 

EN 

175 

   EN 

 
• 
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. 

EN 

176 

   EN 

 
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 

EN 

177 

   EN 

 
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 

(cid:133) Proposal/initiative of limited duration 

1.  (cid:133) 

2.  (cid:133) 

Proposal/initiative in effect from [DD/MM]YYYY to [DD/MM]YYYY 

Financial impact from YYYY to YYYY 

⌧ Proposal/initiative of unlimited duration 

EN 

178 

   EN 

 
1.7.  Management mode(s) envisaged67  

⌧ Centralised direct management by the Commission 

(cid:133) Centralised indirect management with the delegation of implementation tasks to: 

3.  (cid:133) 

4.  (cid:133) 

5.  (cid:133) 

executive agencies 

bodies set up by the Communities68 

national public-sector bodies/bodies with public-service mission 

6.  (cid:133) 

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 

(cid:133) Shared management with the Member States 

(cid:133) Decentralised management with third countries 

(cid:133) 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. 

67 

68 

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 
As referred to in Article 185 of the Financial Regulation. 

EN 

179 

   EN 

 
                                                 
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. 

EN 

180 

   EN 

 
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. 

Budget line 

Type of  
expenditure

Contribution  

Number  
[Description………………………...……….] 

Diff./non-
diff 
(69) 

from 
EFTA70 
countries 

from 
candidate 
countries71 

from third 
countries 

within the meaning 
of Article 18(1)(aa) 
of the Financial 
Regulation  

Heading of 
multiannual 
financial 
framework 

[12.040401.01] 

ESMA – Subsidy under Titles 1 and 2 
(Staff and administrative expenditure 

•  New budget lines requested 

Diff. 

YES 

NO 

NO 

NO 

In order of multiannual financial framework headings and budget lines. 

69 
70 
71 

Diff. = Differentiated appropriations / Non-Diff. = Non-differentiated appropriations 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidate countries from the Western Balkans. 

EN 

181 

   EN 

 
 
                                                 
3.2. 

Estimated impact on expenditure 

3.2.1. 

Summary of estimated impact on expenditure  

Heading of multiannual financial 
framework:  

1A 

Competitiveness for Growth and Employment 

EUR million (to 3 decimal places) 

DG: <MARKT> 

(cid:121) Operational appropriations  

12.0404.01 

Number of budget line 

of 

Appropriations 
administrative 
from the envelope for specific programmes73  
Number of budget line 

an 

TOTAL appropriations 
for DG <MARKT> 

Year 
201372 

Year 
2014 

Year 
2015 

… enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

0.394 
0.394 

0.675 
0.675 

0.675 
0.675 

Commitments 

Payments 

Commitments 

Payments 

(1) 

(2) 

(1a) 

(2a) 

nature 

financed 

Commitments 

Payments 

(3) 

=1+1a 
+3 

=2+2a 

+3 

0 

0 

0 

0.394 

0.675 

0.675 

0.394 

0.675 

0.675 

1.744 
1.744 

1.744 

1.744 

72 
73 

EN 

Year N is the year in which implementation of the proposal/initiative starts. 
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. 

182 

E

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
(cid:121) TOTAL operational appropriations  

Commitments 

Payments 

(cid:121)  TOTAL  appropriations  of  an  administrative  nature 
financed from the envelope for specific programmes  

(4) 

(5) 

(6) 

0 

0 

0 

0 

0 

0 

0 

0 

0 

TOTAL appropriations  
under HEADING <1A> 
of the multiannual financial framework 

Commitments 

=4+ 6 

0.394 

0.675 

0.675 

Payments 

=5+ 6 

0.394 

0.675 

0.675 

Comments: 

1) Tasks in relation to all market and trading structures 

Trading venues 

1.744 

1.744 

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. 

EN 

183 

E

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 

EN 

184 

E

 
  
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 

EN 

185 

E

 
  
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: 

(cid:121) TOTAL operational appropriations  

Commitments 

Payments 

(cid:121)  TOTAL  appropriations  of  an  administrative  nature 
financed from the envelope for specific programmes  

(4) 

(5) 

(6) 

TOTAL appropriations  
under HEADINGS 1 to 4 
of the multiannual financial framework 
(Reference amount) 

Commitments 

=4+ 6 

0.394 

0.675 

0.675 

Payments 

=5+ 6 

0.394 

0.675 

0.675 

1.744 

1.744 

EN 

186 

E

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Heading of multiannual financial 
framework:  

5 

" Administrative expenditure " 

Year 
2012 

Year 
2013 

Year 
2014 

… enter as many years as 
necessary to show the duration 
of the impact (see point 1.6)  

TOTAL 

EUR million (to 3 decimal places) 

DG: <MARKT> 

(cid:121) Human resources  
(cid:121) Other administrative expenditure  

TOTAL DG <…….> 

Appropriations  

0 

0 

0 

0 

0 

0 

TOTAL appropriations 
under HEADING 5 
of the multiannual financial framework  

(Total 
= Total payments) 

commitments 

0 

0 

0 

Year 
201274 

Year 
2013 

Year 
2014 

… enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

EUR million (to 3 decimal places) 

TOTAL appropriations  
under HEADINGS 1 to 5 
of the multiannual financial framework  

Commitments 

0.394 

0.675 

0.675 

Payments 

0.394 

0.675 

0.675 

1.744 

1.744 

74 

Year N is the year in which implementation of the proposal/initiative starts. 

EN 

187 

E

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.2.  Estimated impact on operational appropriations  

7.  (cid:133) 

8.  ⌧ 

The proposal/initiative does not require the use of operational appropriations  

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. 

EN 

188 

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3.2.3.  Estimated impact on appropriations of an administrative nature 

3.2.3.1.  Summary 

9.  ⌧ 

The  proposal/initiative  does  not  require  the  use  of  administrative 

appropriations  

10. 

(cid:133)  The  proposal/initiative  requires  the  use  of  administrative 

appropriations, as explained below: 

EN 

189 

   EN 

 
3.2.3.2.  Estimated requirements of human resources 

11. 

resources 

⌧ The  proposal/initiative  does  not  require  the  use  of  human 

12. 

(cid:133)  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. 

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3.2.4.  Compatibility with the current multiannual financial framework  

13. 

(cid:133)  Proposal/initiative 

is  compatible 

the  current  multiannual 

financial framework. 

14. 

⌧ 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. 

requires  application  of 
instrument or revision of the multiannual financial framework75. 

(cid:133)  Proposal/initiative 

the 

flexibility 

Explain what is required, specifying the headings and budget lines concerned and the corresponding 
amounts. 

3.2.5.  Third-party contributions  

16. 

(cid:133)  The  Proposal/initiative  does  not  provide  for  co-financing  by 

third parties 

17. 

below: 

⌧ The  Proposal/initiative  provides  for  the  co-financing  estimated 

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) 

Specify  the  co-financing 
body  

MEMBER  STATES  via 
EU 
national 
supervisors(*) 

TOTAL appropriations 
cofinanced  

0.591 

1.013 

1.013 

0.591 

1.013 

1.013 

Total 

2.617 

2.617 

(*)  Estimation  based  on  current  financing  mechanism  in  draft  ESMA  regulation 
(Member States 60% - Community 40%). 

75 

See points 19 and 24 of the Interinstitutional Agreement. 

EN 

191 

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3.3. 

Estimated impact on revenue  

18. 

19. 

⌧ Proposal/initiative has no financial impact on revenue. 

(cid:133)  Proposal/initiative has the following financial impact: 

20. (cid:133) on own resources 

21. (cid:133) on miscellaneous revenue 

EN 

192 

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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: 

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– 

– 

– 

– 

– 

– 

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 

2013 

Amount (in thousands) 
2014 

2015 

Total 

Title 1: Staff expenditure 

11 Salaries and allowances 
- of which temporary agents 
- of which SNEs 
- of which contract agents 

12 Expenditure related to recruitment 

13 Mission expenses 

15 Training 

Total Title 1: Staff expenditure 

Of which Community contribution (40%) 
Of which Member State contribution (60%) 

=8*127*1,27
=2*73*1,27 
=1*64*1,27 

658
81
45

1.317 
162 
89 

1.317
162
89

3.293
405
223

=11*12,7 

140   

=11*10 

=11*1 

55

6

985

394
591

110 

11 

110

11

140

275

28

1.689 

1.689

4.363

676 
1.013 

676
1.013

1.746
2.617

The  following  table  presents  the  proposed  establishment  plan  for  the  nine  temporary  agent 
positions: 

EN 

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Function group and grade 

Temporary 
posts 

AD 16 
AD 15 
AD 14 
AD 13 
AD 12 
AD 11 
AD 10 
AD 9 
AD 8 
AD 7 
AD 6 
AD 5 

AD total 

2 
3 
3 

8 

EN 

195 

   EN