What are the rules for?Market Abuse Regulation (MAR) and the Market Abuse Directive (MAD) II are designed to improve confidence in the integrity of European markets, increase investor protection and encourage greater cross-border co-operation. Most of the provisions apply from 3 July 2016.
What is the scope of the new rules?The remit of MAR has expanded. The scope is extended to include all financial instruments admitted to trading on a multilateral trading facility (MTF) or an organised trading facility (OTF). It also applies to financial instruments where the price or value depends on or has an effect on the price or value of a financial instrument trading on a regulated market (RM), MTF or OTF.
What do the rules say about insider dealing and unlawful disclosure?The use of inside information to amend or cancel an order is now considered to be insider dealing. Recommending or inducing another person to transact on the basis of inside information amounts to unlawful disclosure of inside information.
And market soundings?MAR recognises that inside information can be legitimately disclosed to a potential investor in the course of market soundings in order to measure interest in a potential transaction, its size or pricing. However, MAR adds requirements on firms to establish a framework for persons to make legitimate disclosures of inside information and imposes detailed record-keeping requirements in the course of market soundings.
Insider lists?These place an obligation on issuers and emission allowance market participants
(EAMPs) to draw up and maintain a list of all those persons working for them that have access to inside information.
Managers'/directors’ transactions?Persons discharging managerial responsibilities (PDMR) within an issuer and persons closely associated with them, must notify the issuer and the regulator of personal transactions they undertake in the issuer’s financial instruments.
Stabilisations and buy-back transactions?There are some revisions to the existing stabilisation and buy-back regulations. Stabilisations must be carried out for a limited period; relevant information about the stabilisation must be disclosed; and adequate limits regarding price must be respected. For buy-back transactions, full details of the programme must be disclosed prior to the start of trading; trades must be reported to the relevant competent authority as being part of the programme and subsequently disclosed to the public; and adequate limits regarding price and volume must be respected.
Algorithmic and high-frequency trading?Some types of abusive algorithmic and high-frequency trading strategies are expressly forbidden. Furthermore, any person(s) involved in design or coding of algorithms that are manipulative or abusive are within scope.
Investment recommendations?Persons producing or disseminating investment recommendations are required to ensure information is objectively presented, and to disclose any conflicts of interest. Investment recommendations will also include sales notes and re-dissemination of research.
Suspicious Transaction and Order Reports (STORs)?Investment professionals’ obligation to report suspicious transactions is extended to cover suspicious orders as well. Trading venues are also caught by the obligation to submit STORs.
This article was originally published in the July 2016 print edition of The Review.