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ESMA Publishes Statement on Trading Obligation for Shares Under MiFIR After Brexit

On October 26, the European Securities and Markets Authority (ESMA) published a statement on the impact of the UK’s departure from the EU on December 31, relating to the requirement for EU investment firms only to trade shares on an EU trading venue, with an EU systemic internalizer or on an equivalent third-country exchange (known as the share trading obligation or STO) under Article 23 of the Markets in Financial Instruments Regulation (MiFIR) (the Statement).

In the Statement, ESMA indicates that in the absence of an equivalence decision in respect of the UK by the European Commission, the same potential adverse effects on the application of the STO would occur as ESMA also considers what would occur in the event of a no-deal Brexit. ESMA originally published its statement on a no-deal Brexit on May 29, 2019 and reiterated in the Statement that its earlier guidance to mitigate risks for market participants remain relevant.

ESMA predicts that all EU shares with an ISIN starting with a country code corresponding to an EU member state or shares with an ISIN from Iceland, Liechtenstein or Norway (EEA ISINs) will be within the EU STO at the end of the transition period. GB ISINs, which correspond to the UK, will therefore fall outside the EU STO.

The Statement also clarifies that trading of GBP-denominated shares with an EEA ISIN on a UK trading venue is not expected to be subject to the EU STO under Article 23 of MiFIR because of its rarity. This will prevent the overlapping of STO obligations if the UK adopts an approach excluding EEA ISINs under UK STO and minimize potential disruption for market participants. However, ESMA highlights that the scope of the UK STO after the end of the transition period remains unclear at this stage.

The application of the STO to shares with a different ISIN should continue to consider the previous ESMA guidance published on November 13, 2017.

The Statement is available here.

 

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 304
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About this Author

Carolyn H. Jackson, International Attorney, Katten Muchin law firm
Partner

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...

+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
Partner

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...

44-0-20-7776-7666
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