A few annoying facts from a financial lawyer's perspective...






1. The European Commission does not observe the timeframes established by law - fact acknowledged by the European Securities and Markets Authority (ESMA) on multiple occasions, in particular as regards the key MiFID II secondary legislation, as well as the new Market Abuse Regulation (MAR) - see for example "ESMA notes that the letter from the European Commission was received in excess of the three-month period foreseen in Article 15(1) of the ESMA Regulation" (ESMA's Opinion Draft Implementing Technical Standards on the technical means for appropriate public disclosure of inside information and for delaying the public disclosure of inside information, 17 June 2016, ESMA/2016/982, p. 3).

2. Key MAR secondary legislation published a few days before its entry into force. Example? Commission Implementing Regulation (EU) 2016/1055 of 29 June 2016 laying down implementing technical standards with regard to the technical means for appropriate public disclosure of inside information and for delaying the public disclosure of inside information published in the EU Official Journal on 30 June 2016 and enters into force on 3 July 2016 i.e. after two days (weekend including).

3. Lack of agreement between the European Commission and ESMA on key elements of the new market abuse infrastructure - example: the way inside information must be disseminated by emission allowance market participants subject, in parallel, to REMIT. The above Regulation of 29 June 2016 adopted by the European Commission in spite of the negative ESMA opinion.

4. Lack of common stance of the European Commission and ESMA on crucial elements of the MiFID II market infrastructure i.e. parameters of basic tests for the ancillary activity exemption - despite growing uncertainty, missed deadlines and growing pressure from all over of the market spectrum.


All this has been known for all involved, but now I have read this in the Annual Activity Report (AAR) of the Agency for the Cooperation of Energy Regulators (ACER) Year 2015, 04.07.2016, p. 6):


"In the gas sector, the Agency was unable to formulate a recommendation for the last priority Network Code. After providing, in March 2015, its reasoned opinion on the draft Network Code on Harmonised Rules for Transmission Tariff Structures submitted by ENTSOG, and the submission of a revised draft by ENTSOG in July, the recommendation proposed by the Director failed to obtain the necessary favourable opinion from the Board of Regulators. The Network Code is now being finalised by the Commission".


It follows, not only the European Commission and ESMA are not capable to come to conclusions but also ACER itself is unable to formulate an opinion due to internal tensions...?


What is going on? The European Transmission System Operators, gathered as the ENTSO-E, are also unable to agree on Capacity Calculation Regions, by the way. ACER will have to decide. But will ACER be capable of doing this?


Steven Maijoor - the ESMA's Chair - on 21 June 2016 said:


"Finally, there is the ancillary activity standard. I am aware that the ESMA opinion does not settle the difficult issue on the table as we are not proposing a concrete capital-based test.


We maintain that a capital-based test has significant drawbacks. The main ones being, first, that typically non-financials do not administer the capital allocated to derivatives trading and a capital test would therefore be costly to implement, especially for smaller non-financials. Secondly, the capital needed for a non-financial's derivatives trading will change very much over time depending on the development of trading positions.
Hence, whether a non-financial would meet the capital test and be caught by the MIFD II requirements, could be very unstable over time.


We have nonetheless identified some metrics that could be used by the Commission to construct a capital-based test. We did not consider that we could go any further and propose a particular threshold as, within the timeframe available, we have no data to calibrate such a threshold" (ECON MiFID II/MiFIR Scrutiny Session – 21 June 2016, Committee on Economic and Monetary Affairs European Parliament (ESMA/2016/940)).


OK, I understand, but what does it mean...? There will be another key piece of MiFID II secondary legislation (on the decisive issue of the ancillary exemption thresholds) adopted by the European Commission in the presence of such clear and unequivocal ESMA objection? What has been the ESMA established for, if the crucial financial legislation is implemented without ESMA's support? What was the purpose of several public consultations carried out by ESMA in that regard?


To be clear, I'm not advocating in this place for the stance of any institution, neither the European Commission nor ESMA, as the issue is really complicated, but I regret lacking ability to devise a compromise acceptable to both parties, and - what's equally important - good for the market and its participants.


Why do I refer to all these facts? I must say, in the past I admired the functioning of the EU legislative procedures, although prolonged, but predictable and done in the orderly manner.


The above examples show, this is no longer the case, at least in some areas. Unfortunately, this applies to financial market - such vulnerable after financial shocks.


More and power is being concentrated in the hands of European institutions. For this to continue, not only financial markets but also European institutions must regain trust in their efficient functioning.


This is understandable, there are conflicting interests, which must be reconciled, and this is not always possible. But there are also legislative deadlines set in advance and the influence of the law on real economy.


When the law disintegrates the economy, it must be a source of concern. Maybe the title of this article is overly emphasised but the reaction to certain harmful tendencies must be early enough to avoid damage.


I have forgotten one more disruptive incident - the European Commission is unable to meet the deadline - agreed long time ago with international partners to fall in September 2016 - to issue the EMIR collateral regulation... 


I know now why the Commissioner Hill resigned. And it isn't for Brexit...




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