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COVID-19: ESMA actions regarding ongoing consultations, systematic internalisers and call recording

The current situation in relation to the coronavirus crisis calls for the adoption of further measures by the European Securities and Markets Authority (“ESMA”). For this reason, ESMA has decided

  • to extend the response date for all ongoing consultations with a closing date on, or after, 16 March 2020 by four weeks.
  • to ensure coordinated supervisory actions by national competent authorities (“NCAs”) on the application of the new tick-size regime for systematic internalisers under the Markets in Financial Instruments Regulation (EU) 2014/600 (“MiFIR”).
  • to clarify issues regarding the application by firms of the Markets in Financial Instruments Directive 2014/65/EU (“MiFID II”) requirements on the recording of telephone conversations.

Deadline extension for all ongoing consultations

Among others, ESMA has the task to contribute to the establishment of high-quality common regulatory and supervisory standards and practices, in particular by providing opinions to the Union institutions and by developing guidelines, recommendations, and draft regulatory and implementing technical standards. These tasks are conducted through a consultation procedure in which the market players involved are given the opportunity to comment on the relevant drafts.

However, the COVID-19 crisis is affecting the activities of all market players. As a result, stakeholders may wish to submit comments, but cannot contribute to the consultation process due to the current situation. In order to avoid such a situation and to accommodate market actors in this respect, ESMA has considered it appropriate to extend the response date for all ongoing consultations with a closing date on, or after, 16 March 2020 by four weeks.

The deadline extension affects the following consultation procedures:

  • Consultation on Guidelines on Internal Controls for Credit Rating Agencies: Original deadline 16 March 2020, now 13 April 2020
  • Consultation on MiFIR report on systematic internalisers: Original deadline 18 March 2020, now 15 April 2020
  • Guidelines on securitisation repository data completeness and consistency thresholds: Original deadline 16 March 2020, now 13 April 2020
  • Consultation on MiFID II/ MiFIR review report on the transparency regime for equity: Original deadline 17 March 2020, now 14 April 2020
  • Draft Regulatory Technical Standards under the Benchmarks Regulation: Original deadline 9 May 2020, now 8 June 2020
  • Draft technical standards on the provision of investment services and activities in the Union by third-country firms under MiFID II and MiFIR: Original deadline 31 March 2020, now 28 April 2020
  • Consultation paper on MiFIR review report on transparency for non-equity instruments and the trading obligation for derivatives: Original deadline 19 April 2020, now 17 May 2020


New application deadline for the tick-size regime

In the course of the amendment of MiFIR by Regulation (EU) 2019/2033, the tick-size regime for systematic internalisers has been introduced. Systematic internalisers’ quotes, price improvements on those quotes and execution prices shall comply with tick sizes set in accordance with Article 49 of MiFID II. Application of tick sizes shall not prevent systematic internalisers matching orders large in scale at mid‐point within the current bid and offer prices.

Originally, the date of the application of the tick-size regime for systematic internalisers has been 26 March 2020. However, ESMA understands that the compliance with the new tick-size requirements as of 26 March 2020 could create unintended operational risks for EU market participants in the current market situation in the context of the increasing spread of the COVID-19 pandemic. Due to the current extraordinary circumstances, ESMA expects competent authorities not to prioritise their supervisory actions in relation to the new tick-size regime introduced in MiFIR towards systematic internalisers, as of 26 March 2020 and until 26 June 2020, and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.

Clarification of position on call recording under MiFID II

MiFID II states that mandatory records to be kept by firms include, amongst other things, recording of telephone conversations relating to, at least, transactions concluded when dealing on own account and the provision of client order services that relate to the reception, transmission and execution of orders.

However, given the exceptional circumstances created by the COVID-19 outbreak, scenarios may emerge where, notwithstanding steps taken by the firm, the recording of relevant conversations required by MiFID II may not be practicable (for example due to the sudden remote working by a significant part of staff, or the lack of access by clients to electronic communication tools). If firms, under these exceptional scenarios, are unable to record voice communications, ESMA expects them to consider what alternative steps they could take to mitigate the risks related to the lack of recording.

Firms are expected to deploy all possible efforts to ensure that the above measures remain temporary and that recording of telephone conversations is restored as soon as possible.

Further monitoring of the current situation

ESMA, in coordination with national competent authorities, continues to monitor developments in financial markets, including the application of relevant EU requirements by market participants, as a result of the COVID-19 situation and is prepared to use its powers to ensure financial stability, orderly functioning of EU markets and investor protection.


Please note: This newsletter merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The newsletter cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the newsletter.

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