ESMA consults on draft guidelines under MiFID2

A consultation on draft guidelines for the management of trading venues and reporting services providers sets out proposed requirements for the management body and each of its individual members with respect to sound, prudent and responsible management of firms. The draft guidelines are closely linked to forthcoming draft guidelines on the assessment of suitability of members of management bodies and key function holders under CRD 4 and MiFID2, which ESMA and the EBA will consult on jointly.

A consultation on draft guidelines on MiFID2 product governance requirements sets out, in particular, guidelines on the target market assessments by manufacturers and distributors of financial products. For manufacturers of financial products the draft guidelines relate to the identification of potential target markets and articulation between the distribution strategy of the manufacturer and its definition of the target market. For distributors the draft guidelines discuss identification of the target market, reviewing whether products are reaching their target market, distribution of products manufactured by entities that are not subject to MiFID2 product governance requirements and the application of requirements in relation to pre-MiFID2 products. Certain transversal issues contained in the draft guidelines are applicable to both manufacturers and distributors, in particular:

• identification of the negative target market by the manufacturer and distributor, i.e. clients for whom certain investment products are not compatible; and
• application of the target market requirements to investment firms dealing in wholesale markets.

ESMA has also launched a consultation on draft guidelines on trading halts. ESMA is mandated to develop guidelines on the calibration of trading halts but is also consulting on own initiative guidelines in relation to how trading halts should be communicated to market participants and other venues, in particular:

• the dissemination of information regarding the activation of mechanisms to manage volatility on a specific trading venue; and
• the procedure and format of reports on trading halts' parameters from national competent authorities to ESMA.

Comments on the draft guidelines on sound management and product governance requirements are due by 5 January 2017. Comments on the draft guidance on trading halts are due by 6 December 2016.