October 23, 2019

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ESMA Publishes Statement on the Impact on the MiFIR Trading Obligation for Shares; the FCA Responds

On March 19, the European Securities and Markets Authority (ESMA) published a statement on the impact on the Markets in Financial Instruments Regulation (MiFIR) trading obligation for shares (TO) if the United Kingdom left the European Union on March 29 (Brexit) without a withdrawal agreement (no-deal Brexit) and without an equivalence decision for the United Kingdom made by the European Commission.

ESMA recognizes that its approach may lead to an overlap of trading obligations for a number of shares and potentially a greater level of fragmentation of trading if the United Kingdom applies an identical approach. However, in the absence of any clarification by ESMA, this would, by default, lead to the application of the MiFIR TO to shares traded in the remaining 27 Member States of the European Union. ESMA’s approach aims to limit potential market disruption while also ensuring that the MiFIR TO for investment firms is adequately and consistently applied across the European Union.

ESMA’s statement reflects these aspects and contains guidance on the application of the MiFIR TO for shares in a no-deal Brexit scenario. To inform market participants effectively, ESMA has published a public statement on the impact of Brexit on the trading obligations for shares together with a list of instruments that would be subject to the TO for shares. ESMA also highlighted that the guidance provided in the public statement should only apply in the case of a no-deal Brexit occurring on March 29.

On the same date, the UK Financial Conduct Authority (FCA) published its response to ESMA’s statement. In its statement, the FCA stated that it believes that only a “comprehensive and coordinated approach can provide the necessary certainty to market actors,” without which it will not be possible to address the issues of conflicting obligations applying to the same instruments. The FCA also has urged further dialogue with ESMA and other EU authorities on the issue of the on-shoring of EU legislation and the overlap between UK and EU obligations, to minimise the risks of disruption in the interests of orderly markets.

ESMA’s statement is available here and the list of instruments subject to the MiFIR TO for shares is available here.

The FCA’s statement is available here.

©2019 Katten Muchin Rosenman LLP


About this Author

John Ahern, Financial Attorney, London, Katten Law Firm

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

+44 (0) 20 7770 5253
Carolyn H. Jackson, International Attorney, Katten Muchin law firm

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...