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Policy Information

Markets and Securities

Published: 24 January 2018
From: Department of Finance

Introduction

By bringing together buyers and sellers in financial assets such as stocks, bonds, commodities, derivatives and currencies, the financial markets provide access to capital, aids effective price discovery and assists with the transfer of risk and liquidity.

The government seeks to ensure that our laws in relation to financial services promote stability, market integrity and investor protection, while facilitating competition and innovation. This includes representing Ireland’s interests at EU negotiations on the various legislative proposals regarding financial markets and the transposition of EU directives in this area into Irish Law.

The following are the main EU financial services files which the Markets and Securities unit is responsible for:

Markets in Financial Instruments Directive (MiFID II) and Markets in Financial Instruments Regulation (MiFIR)

MiFID II and its accompanying regulation MiFIR is a legislative framework to improve the regulation of financial markets across the EU and enhances investor protection. I The Directive requires more trading to take place on regulated platforms, introduces rules on high frequency trading, addresses the issue of price volatility in commodity derivatives markets, and standardises regulatory disclosures. - https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-markets/securities-markets/investment-services-and-regulated-markets-markets-financial-instruments-directive-mifid_en#mifid-2-and-mifir

Ireland transposed MiFID II via S.I. No. 375/2017 – European Union (Markets in Financial Instruments) Regulations 2017 -

http://www.irishstatutebook.ie/eli/2017/si/375/made/en/print

Under MiFID II, Member States have the right to impose criminal penalties in addition to the requirement to impose administrative penalties. Ireland exercised this discretion and criminal sanctions for certain serious infringements of the MiFID II framework are contained in the Markets in Financial Instruments Act 2018 -

http://www.irishstatutebook.ie/eli/2018/act/25/enacted/en/pdf

Capital Markets Union (CMU)

The Capital Markets Union (CMU) and CMU Action Plan are made up of 30 separate actions and related measures that aim to better integrate capital markets across the European Union. The various proposals are designed to reduce market fragmentation, diversify sources of finance, improve cross border capital flows and facilitate easier access to finance for businesses. The Capital Markets Union has the potential to support the further growth of SMEs and the capital markets of smaller Member States.

Ireland is a strong supporter of the CMU Action Plan. Minister Donohoe and his Ministerial counterparts from Denmark, Estonia, Finland, Latvia, Lithuania, Sweden and the Netherlands published a common position on the Capital Markets Union in a joint letter. The common position highlighted the urgency of progressing the CMU Action Plan by prioritising those elements of the Plan with the greatest potential and broadest support.

Investment Firm Review

As part of the Capital Markets Union this proposal aims to allow investment firms to avail of a more proportionate prudential regime for investment firms. Large systemic investment firms (Class 1) are brought under the remit of the European Central Bank (ECB) and the Single Supervisory Mechanism (SSM). The proposal streamlines the rules for Class 2 (large but non systemic) and Class 3 (small and unconnected) firms, lowering compliance costs while providing for better oversight of these firms.

https://ec.europa.eu/info/publications/171220-investment-firms-review_en

Ireland has been a strong supporter of a more proportionate prudential regime for investment firms.

Regulation on OTC derivatives, central counterparties and trade repositories (commonly known as the European Markets Infrastructure Regulation, or EMIR)

EMIR provides for greater stability, transparency and efficiency in “over the counter” (OTC) derivative markets. It is a G20 commitment and a key step in the efforts to improve the regulatory framework for European financial markets.

EMIR also sets out rules for the authorisation and supervision of Central Counterparties which are an important element of market infrastructure.

EMIR:

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-markets/post-trade-services/derivatives-emir_en

Transposing SI: http://www.irishstatutebook.ie/eli/2014/si/443/made/en/print

Regulation on improving securities settlement in the European Union and on central securities depositories (CSDs) and amending Directive 98/26/EC (CSDR)

The purpose of this Regulation is to improve market integrity and trade efficiency in securities settlement across the EU.

Central Securities Depositories are specialist settlement systems that hold financial instruments such as shares on behalf of investors and facilitate transfers in ownership through electronic book entry rather than the actual physical transfer of paper certificates.

It was transposed in 2016 as SI 481/2016.

CSDR: https://ec.europa.eu/info/law/central-securities-depositories-regulation-eu-no-909-2014_en

Transposing SI: http://www.irishstatutebook.ie/eli/2016/si/481/made/en/print