European Commission DG Internal Market and Services Financial Services Policy and Financial Markets Securities markets

Transcription

1 European Commission DG Internal Market and Services Financial Services Policy and Financial Markets Securities markets BEREICH Integrierte Aufsicht GZ FMA-LE0001/0015-LAW/2010 (bitte immer anführen!) SACHBEARBEITER/IN Dr. Christoph Kapfer, LLM, MBA TELEFON +43 (0) TELEFAX +43 (0) WIEN, AM Public Consultation: Review of the Markets in Financial Instruments Directive (MiFID) Dear Madam or Sir! The Austrian Financial Market Authority (FMA) is the Austrian competent authority under MiFID (Directive 2004/39/EC and the Implementing Directive 2006/73/EC and the Implementing regulation No 1287/2006) in Austria and would like to comment on the changes proposed in the Commission services consultation paper of 8 December 2010 regarding a Review of the Markets in Financial Instruments Directive (MiFID) as follows: We appreciate and welcome the opportunity to comment on the far reaching proposals for changes in MiFID from the point of view of a national competent authority. Generally we believe that in light of the lessons learned since MiFID became applicable a review of its regulatory content is necessary in some important areas. Nevertheless we do not believe that all the proposed changes are necessarily called for. To this end we would like to emphasize the following important points of our comments: The FMA remains cautious with regard to introducing so called organised trading facilities and crossing networks which would add new complexity to the existing regulatory framework and should therefore be closely evaluated regarding its market impact (for details see below 2.); recognises automated trading and high frequency trading as one of the most important regulatory challenges and therefore generally welcomes the proposed rules (especially regarding specific organisational and fit and proper requirements) in this regard (for details see below 4.); supports extending pre- and post-transparency requirements to equity like instruments and non-equity markets (for details see below 8.and 10.); welcomes the proposal for a consolidated European tape (for details see below 12.);

2 supports the proposal to require organised trading venues to make available to regulators and the public harmonised position information in commodity derivatives markets (for details see below 13.); proposes that MiFID exemptions for commodity firms should be very narrow and limited (for details see below 14.); believes that the scope of transaction reporting should be broadened (for details see below 15.); prefers that the reporting mechanisms remain operated on a national level (for details see below 17); recommends to narrow the scope of the optional exemptions of the directive and suggests that only services provided with regard to non-complex financial instruments should fall under these exemptions (for details see below 18.); believes that a general obligation to inform investors about various developments also subsequently to the provision of investment advice may have adverse impacts from an investor protection point of view (e.g. encourage investors for financial reasons to turn to execution only services) (for details see below 20 and 21); suggests that it should be clarified that local authorities are not per se professional clients or eligible counterparties (for details see below 22); supports a notification requirement for changes in the internal control functions (for details see below 24.); suggests to introduce a requirement that all natural persons who can represent a tied agent in the provision of an investment service have to be registered in the public register (for details see below 26.); welcomes the harmonisation of sanctioning regimes in the EU also with regard to the MiFID provisions and believes that a mandatory requirement to publish sanctions would be appropriate in most cases in this context (for details see below 27.); believes that bans on specific activities, products or practices should be made on a European level through ESMA (for details see below 29.); shares the view that position limits for derivatives are if carefully calibrated useful tools to reduce systemic risks. In detail we have the following comments with regard to the proposed changes: I. Developments in Market Structures (Chapter 2) 1. Defining admission to trading (Question 1) The FMA agrees in principal with the proposed definition of admission to trading. However it should be considered that these decisions of admission to trading can be made on the basis of 2/13

3 different legal frameworks. According to the Austrian Stock Exchange Act, the admission to trading on a regulated market is granted under public law whereas an MTF-operator s decision to include an instrument in its trading is regarded as an act purely under private law. Therefore, different terms for these two kinds of admissions should be also used in MiFID. 2. Organised trading facilities (Questions 2 to 7) We are cautious on the merits of introducing a broadly defined organised trading facility into the MiFID-framework of trading venues. This would to our opinion significantly complicate the existing directive and blur the lines between such a facility and other (existing) investment services. Also introducing a quantitative threshold as the decisive distinguishing criteria does not seem to solve this issue adequately. Investment services (and the different levels of transparency and protection investors can expect when consuming a particular service) should to our opinion be distinguished by objective criteria directly related to the nature and specific risks of a particular service. To make this distinction mainly by the volume at which a certain service is provided would to our opinion not be appropriate. Investors using small volume providers of a particular service have to our opinion generally the same justified interest in transparency and protection as those using large volume providers. They should therefore be treated equally. Generally we therefore believe that the existing regulatory categories (regulated market, MTF, systematic internaliser) are sufficient in this context. Each firm should have to clearly decide under which category and within which limits it provides its services. We therefore also believe that market like services should be treated prima facie as services reserved for a regulated market, MTF, or systematic internaliser. Equally we also do not believe that a sub-regime for crossing networks should be introduced. Such an activity by a firm if not covered by the investment services execution of client orders or/and reception and transmission of orders should to our opinion be treated according to the existing MiFIDcategories either as an MTF or systematic internaliser. 3. Developments in Market Structures Organised trading facilities (questions 8 to 12) The FMA supports CESR s (ESMA s) view that in order for a derivative product to be deemed eligible for trading on an organised trading venue, a number of pre-conditions must be satisfied. These are (a) that the derivative contract is standardised from a product, legal and process point of view; and (b) that the market for the derivative contract is sufficiently liquid. Furthermore we are of the opinion that those derivatives fulfilling these conditions should be traded exclusively on regulated markets, MTFs or if they are introduced organised trading facilities satisfying all conditions mentioned in point of the consultation paper. Regarding the criteria for sufficient liquidity for trading on the mentioned trading venues (regulated market, MTF, and organised trading facilities), a derivative product already traded on a regulated market or MTF should be presumed to satisfy all necessary conditions. If a derivative product is not already traded on a regulated market or MTF, ESMA should define a specific minimum number of transactions for a derivative to be considered as liquid. This minimum number should reflect the general circumstances (e.g. turnover in the spot market) of the relevant specific market places. In order to achieve more competition in the market (question 11), the introduction of a broader spectrum of dealers in specific financial instruments may be appropriate. There also still exist obstacles with regard to legal, product and process standardisation which should be discussed between ESMA and the industry and resolved by appropriate regulation. This would to our opinion be beneficial with regard to market efficiency. 3/13

4 4. Developments in Market Structures Automated trading and related issues (Questions 13 to 20) We believe that the proposed definition of automated trading as trading involving the use of computer algorithms to determine any or all aspects of the execution of the trade such as the timing, quantity and price is appropriate. The same applies to considering high frequency trading as a subcategory of automated trading. We support the proposal that algorithmic trading should be made subject to specific organisational and fit and proper requirements (possibly together with specific authorisation requirements). However it does not seem to be appropriate to relate this to the triggering of a certain market participant specific threshold, as systemic problems arising from this kind of trading may also arise if such trades are performed by different market participants with none of them triggering such a threshold by themselves. With regard to risk controls we believe that in order to mitigate potential trading system errors these controls should be implemented and continuously adjusted by firms which are engaged in automated trading or allow their systems to be used by other traders. It may also be reasonable to impose an obligation on the market operator to monitor the potential mutual risks arising from the use of algorithmic trading activities by all market participants. Additionally the FMA believes that risk controls such as circuit breakers should be put in place by trading venues because they may reduce the risk of trading system errors. The FMA supports transparent rules based on objective criteria and non-discriminatory access to co-location facilities provided by organised trading venues (question 17). We believe that the prescription of a minimum tick size (question 18) could be an adequate instrument to reduce the risks linked to the use of automated trading strategies. However it has be considered that there might be frictions between harmonised minimum tick sizes and the different market access fees in different markets. Automated trading systems are programmed to quickly detect imperfections in trading activity and rapidly trade in the market. This may generate a so called hot potato effect. High frequency trading systems also have the capability to execute and cancel orders within splitseconds and may therefore send false signals of liquidity to other market participants. Many of such orders are canceled before anyone can execute against them. Furthermore in such an environment effects in the price occur faster because of the increased trading speed and the market impact of certain trades could be reduced. If a rule is introduced that requires high frequency trading systems to provide additional liquidity it has to be also considered that this could have the side effect that algorithmic trading instruments would not be used to the same extent any more. We are concerned that a rule requiring orders to rest on the order books for a certain period of time ( time in force rule ) could reduce the willingness of market participants to execute limit orders. This might result in reduced liquidity and may make accurate pricing more difficult when the markets move very quickly. 5. Developments in Market Structures Further alignment and reinforcement of organisational and market surveillance requirements for MTFs and regulated markets as well as organised trading facilities (Questions 23 and 24) A further alignment of the organisational requirements for regulated markets and MTFs seems to our opinion be appropriate to the extent that it does not blur the line between the services provided by these two kinds of trading venues. In areas not specific to the nature of a MTF the 4/13

5 same regulatory level with regard to organisation and market surveillance should apply for reasons of investor protection and ensuring a level playing field. We also support a provision that requires regulated markets and MTFs to cooperate in an immediate manner on market surveillance, including informing one another on trade disruptions, suspensions and conduct involving market abuse. 6. SME Markets (Questions 25 and 26) Strengthening SMEs across Europe, which significantly contribute to economic growth, employment, and innovation is a goal worthwhile pursuing. Nevertheless, it must be ensured that a special SME markets regime is compatible with maintaining a level playing field and a high level of investor protection. Additionally we consider the identification of appropriate differentiating criteria for SME markets and their appropriate calibration as very challenging. II. Pre- and Post-Trade Transparency (Chapter 3) 7. Equity markets (questions 27 to 31) The FMA supports the suggested changes of the framework directive regarding a more consistent application of waivers. To introduce an obligation to treat actionable indications of interest as orders and require them to be pre-trade transparent seems to be adequate to provide the market with the necessary relevant information. However we would like to point out that there will be some difficulties for competent authorities in monitoring compliance with such a rule. With regard to the treatment of order stubs (question 29) we believe that it would be adequate to retain the thresholds in their present form. Additionally the FMA believes that a prohibition of embedding fees would be adequate (question 30). This is the case because different fees on different market places may blur the information for real price assessments. 8. Equity-like instruments (questions 33 and 34) We support extending transparency requirements to equity-like-instruments and believe that a harmonised European pre- and post-trade transparency regime for these instruments would be beneficial for investors. The thresholds used for equities in this regard will nevertheless have to be carefully evaluated before they can be also used for such instruments. 9. Trade transparency regime for shares traded only on MTFs or organised trading facilities (questions 35 and 36) A careful further alignment of the trade transparency requirements for regulated markets and MTFs would to our opinion be appropriate. Trade transparency is fundamental in ensuring market integrity and plays a vital role in providing best execution to clients. Introducing measures to enhance transparency also with regard to instruments which only trade on MTFs would therefore be welcome. 5/13

6 10. Non equity markets (questions 37 to 41) The transparency of non-equity markets poses significant challenges for supervisors. The FMA therefore supports the introduction of a mandatory harmonised pan-european transparency regime for these markets. To this end we believe that the pre-trade transparency information requirements applicable to equity markets should generally also be implemented for non-equity markets. MiFID should not differentiate between asset classes, as less information in certain asset classes is not in the best interest of investors. Regarding factoring in other measures besides transaction size to account for liquidity we believe that the consideration of such other factors may lead to various problems for market members. The given examples (issuance sizes or frequency of trading) or other parameters (like security specific data) could be difficult to establish on a reliable basis for market members. Furthermore, this difficulty would drive up their administrative costs which in the end would lead to higher transaction costs. The FMA believes, that there is a danger that a complicated post-trade-transparency regime will lead to higher entry barriers for market members, which in turn will lead to less competition and higher transaction costs for investors. III. Data Consolidation (Chapter 4) 11. Improving the quality of raw data and ensuring it is provided in a consistent format (questions 43 to 46) The mentioned requirements and criteria for approved publication arrangements are to our opinion adequate. Any proposal improving the quality and format of post trade reports are supported by the FMA. We also support extending these requirements to equity-likeinstruments as we believe that this would be beneficial for investors. 12. A European Consolidated Tape (questions 51 to 59) The FMA welcomes the European Commission s proposals for a European consolidated tape for post trade transparency. We have no particular preference for one of the proposed options but would like to point out that it is paramount to ensure the utmost quality of such a consolidated tape. Accordingly the choice from the proposed options and the timeframe implementing this choice should be mainly made with this quality focus in mind. We agree with the European Commission s assessment of a European consolidated tape regarding pretransparency data. IV. Measures Specific to the Commodity Derivative Markets (Chapter 5) 13. Specific requirements for commodity derivative exchanges (questions 60 to 63) Requiring organised trading venues which admit commodity derivatives to trading to make available to regulators (in detail) and the public (in aggregate form) harmonised position information by type of regulated entity could be a possible solution to foster transparency within commodity markets. It has to however be pointed out that solving transparency issues within (e.g.) energy derivatives markets will require a whole bundle of measures. 6/13

7 We are doubtful that a categorisation of traders by type of regulated entity will have the desired effect. As most such entities trading in commodities conduct hedging as well as speculative business such a categorisation might not be the most useful. The FMA therefore believes that a categorisation by commercial entities on the one hand and such entities regulated (or better authorised) under EU financial markets legislation would be the most appropriate approach. The FMA believes that excluding OTC commodity derivatives positions from the disclosure of harmonised position information would not be adequate as most commodity contracts are still traded outside regulated markets. We therefore welcome an extension of this disclosure to all OTC commodity derivatives. It should to our opinion be considered to require organised commodity derivative trading venues to design contracts in a way that ensures convergence between futures and spot prices. However we also believe that (e.g. when it comes to settlement issues in energy markets) there should be a broader approach in the design of contracts which should also involve further considerations like the regulation of a particular market (e.g. energy market) and its other specific conditions (capacities, long-term delivery contracts, market concentration, conflicts of interests, etc.) 14. MiFID exemptions for commodity firms (question 64 and 111) A clearly defined scope of the MiFID regulatory regime is of the essence to efficiently encourage compliance by firms and to ensure an effective enforcement of the regime. In order to achieve that goal, exemptions from MiFID should be narrowly and exactly defined and be limited to very few cases. Any clarification of the current regime is therefore welcome. With regard to commodity firms, exemptions should be mainly granted for hedging physical and price risks. We therefore support the proposal to exclude dealing on own account with clients of the main business from the exemption in Article 2 (1) (i). Equally we support the clarification with regard to the exemption in Article 2 (1) (d). Additionally we believe that a complete deletion of this exemption should also be considered. We would also welcome a more precise definition of the notion of ancillary services and a deletion of the exemption in Article 2 (1) (k). The proposed measures, although to our opinion not far reaching enough, would to our opinion contribute to a more effective and stringent regime for all financial instruments. V. Transaction reporting (Chapter 6) 15. Scope (questions 67 to 74) The FMA believes that financial instruments contain the potential for market abuse regardless of trading venue. It would therefore make sense to extend the transaction reporting regime to transactions in all financial instruments. The same applies for depositary receipts that are related to financial instruments (question 69) and commodity derivatives (question 70). The extension of the transaction reporting regime to transactions in all financial instruments whose value correlates with the value of the financial instruments that are admitted to trading or traded on the different MiFID platforms and systems would to our opinion be difficult to implement. To us it seems to be very difficult to find an adequate definition that clearly states which instruments are reportable under such a regime. Furthermore we are concerned that it 7/13

8 will be very costly to identify which instruments correlate with each other in the required detail (question 68). We are of the opinion that an obligation for regulated markets, MTFs and other alternative trading venues to report the transactions of members who are not authorised as investment firms under MiFID, and who are currently not subject to transaction reporting obligations would be very useful for the efficient detection of certain kinds of market abuses. We therefore support the introduction of such a reporting obligation. Furthermore such an obligation would provide equal conditions for investment firms/credit institutions and other firms in this context. The FMA supports the proposals regarding an obligation to store order data as these data would be helpful in identifying trading patterns and attempted market abuses. Equally a greater harmonisation of the storage of order data would be desirable. 16. Content of reporting (questions 75 to 79) The suggested specification of what constitutes a transaction for reporting purposes ensures that all relevant information concerning an executed transaction and simple order routing is reported. We therefore have only one improvement to suggest: It should be clearly defined who and what exactly is meant by counterparty. We strongly support a further harmonisation of client identifiers because client identifiers are extraordinarily important to detect insider trading and market manipulation (e.g. crossings). Equally we believe that the introduction of a separate trader ID would be useful for efficiently combating market abuses. The introduction of implementing acts on a common European transaction reporting format and content should be very carefully considered. The FMA would like to point out its concerns regarding the serious impact such a regulatory change may have on established and well functioning national reporting schemes. It has to be also considered that the impact on the industry with regard to the necessary costs and time for an adaptation of their systems to new requirements in this field may be considerable. 17. Reporting channels (questions 80 to 83) The FMA has a preference for reporting mechanisms to remain operated on a national level. We believe that due to the national competent authorities direct contact with the firms reporting and their knowledge of national market peculiarities that the national competent authorities are best suited for this task. Instead of introducing a reporting mechanism at EU level, it may be worthwhile thinking about introducing a reporting regulation that allows investment firms to report their transactions to one competent authority only. With regard to waiving the MiFID reporting obligation on an investment firm which has already reported an OTC contract to a trade repository or competent authority under EMIR the content of the reports that have to be transmitted under EMIR have to be taken into consideration. If the content under EMIR will be equal to that under Annex I, it may to our opinion be possible to waive the MiFID reporting obligation for these investment firms. If not, we would regard waiving the MiFID reporting obligation as an issue that has to considered very carefully. The same applies to the issue of whether trade repositories under EMIR should need to be separately approved as an Approved Reporting Mechanism under MiFID. 8/13

9 VI. Investor Protection and Provision of Investor Services (Chapter 7) 18. Scope of the Directive (question 84 to 86) We recommend narrowing the scope of the optional exemptions. In particular also the broad range of financial instruments being optionally exempted from the scope of MiFID regarding persons providing the investment services of reception and transmission of orders and/or investment advice should be restrained. To permit Member States not to apply MiFID to firms or persons providing these investment services with regard to all kinds of transferrable securities and units in collective investment undertakings does in our opinion as a general rule not offer investors a sufficiently high level of protection. The necessary level of investor protection can be better achieved by making it mandatory that all investment services regarding certain categories of instruments (i.e. complex financial instruments) fall under the scope of MiFID. We therefore recommend connecting the issue of which categories of financial instruments should always (regarding all investment services) be subject to MiFID with the definition of non-complex financial instruments (see also question 89). We support applying MiFID rules to credit institutions and investment firms when, in the issuance phase, they sell the financial instruments they issue, even when advice is not provided (question 86). A clarification of MiFID in that regard would in our view result in a higher level of legal certainty for investors and is therefore welcomed. Assuming that question 85 refers to structured deposits as defined in the Final Report of the 3L3 Task Force on Packaged Retail Investment Products (PRIPs) of , the FMA is skeptical of an undifferentiated extension of MiFID rules to structured deposits. Concerning structured products and other PRIPS MiFID provisions should be used as benchmarks, while taking into account the specific risk features of the structured product at hand. 19. Conduct of business obligations Execution only services (questions 87 to 90) We appreciate and support a detailed differentiation of certain categories of instruments in the context of execution only. This would allow excluding the provision of execution-only services for certain complex securities such as structured products or products which are difficult to understand for investors. We also agree with the proposed exclusion of the provision of execution-only services in case of providing the service of granting credits or loans for reasons of investor protection. Alternatively, we suggest at least a duty to warn the investor that the granting of credits or loans would increase the client s leverage and risk exposure and the overall complexity of the transaction. In general we believe that an exclusion of several UCITS from the list of non-complex financial instruments makes good sense. The criteria for such a differentiation should be intensely discussed and a decision on that sensitive matter should be made on the basis of these discussions. In addition to that we would like to emphasise that to our opinion there is no reason for an abolishment of the execution-only regime. The possibility for investors to choose between several investment services should remain. 20. Conduct of business obligations Investment advice (questions 91 to 94) The FMA is doubtful that a requirement to inform the client about the range of products the intermediary considers and assesses and an obligation to assess a large number of financial 9/13

10 instruments from different providers will add value for market participants and investors. Equally we believe that providing the underlying reasons for an advice should be collected and assessed sufficiently in the context of the suitability test as presently prescribed. Thus, we do not see a need for further regulatory specifications in this area. The requirement to inform investors about relevant modifications regarding the financial instrument recommended would lead to an obligation to advise the investor subsequently. This would in our opinion cause a significant rise in the costs of this important investment service and investors may then turn to execution-only services or other investment services. However, it would be useful to provide for special rules regarding long term assistance (for a special fee) offered as an additional service on request to clients. 21. Conduct of business obligations Informing clients on complex products (question 95 to 100) We believe that a requirement to provide clients with a risk/gain and valuation profile prior to the transaction would be useful. This information could be helpful for investors in arriving at an informed buying decision. As already discussed in point 20 above we are doubtful that a general requirement to inform investors for an extended period after the provision of the service (here about valuations of complex products, the evolution of the underlying assets of structured finance products, and any material modification in the situation of the financial instruments held by the firm on a client s behalf) would be an adequate improvement of MiFID. To our opinion it is not meaningful to apply the information and reporting requirements also to the relationship with eligible counterparties (question 99). We believe that such market participants should have the relevant knowledge to inform themselves in sufficient detail. We welcome the proposed information requirements regarding ethical or socially oriented investment criteria prior to the transaction. 22. Conduct of business obligations Inducements (question 101 to 106) We do not support a removal of the possibility to provide a summary disclosure concerning inducements. Instead of that implementing acts could clarify the minimum standards of such a summary disclosure. According to our experience we believe that ex-post calculation and disclosure of inducements are very difficult to provide considering the difficulties to even disclose the exact amount of inducements prior to the provision of the relevant services. In Austria the provision of investment advice against remuneration occurs only in a limited number of cases. Banning inducements in relation to several or all investment services would therefore constitute a heavy burden on the industry and will be very hard to realize in practice in an appropriate way. With regard to client classifications we agree with the opinion of CESR in its Technical Advice to the European Commission in the context of the MiFID Review Client Categorisation, Ref.: CESR/ Accordingly we believe that the current MiFID rules on the categories of clients are generally appropriate and do not need to be changed in a fundamental way. Client categorisation rules should in particular not be changed in relation to OTC derivatives or other complex products because new concepts are difficult to define and are likely to quickly lose their relevance over time. 10/13

11 Standards applying to business done with eligible counterparties are presently not set out clearly in the directive. It should be made clear in MiFID that when dealing with this client category firms have to (i) act honestly, fairly and professionally; and (ii) communicate in a way that is fair, clear and not misleading. Technical criteria to further distinguish between clients within the current broad categories of clients ( other authorised or regulated financial institutions, locals, other institutional investors ) could to our opinion possibly benefit firms and their clients. Nevertheless it should be avoided that these additional clarifications lead to a narrowing of the range of per se professional clients. Given that in some Member States local authorities have been classified as per se professionals, while in most others they have not, and due to the fact that the ability of local authorities to engage in financial markets varies from Member State to Member State, there is a need for clarification that local authorities do not fall within the scope of public debt bodies and regional governments and therefore are not per se professional clients or eligible counterparties. 23. Conduct of business obligations Execution quality and best execution (question 109 and 110) We would find a requirement that execution venues publish data on execution quality concerning financial instruments they trade as helpful to determine the best execution venue (see also CESR Technical Advice to the European Commission in the context of the MiFID Review Investor Protection and Intermediaries, Ref.: CESR/10-859). Equally the proposal regarding detailed information requirements concerning the content of execution policies are welcome. Such information would to our opinion help investors to understand and check the execution of their orders. 24. Authorisation and organisational requirements Compliance, risk management and internal audit functions / Specific organisational requirements for the launch of products, operations and services (question 114 to 116) We support the proposals of the European Commission to strengthen the independence and responsibility of the three internal control functions towards the board of directors. Additionally we believe that changes within these functions should have to be notified to the competent authority. In addition it should be clarified that the individual internal control functions provided for in the MiFID can also take over duties of the same kind of internal control functions as spelled out in other EU-Directives (e.g. CRD, Solvency II) or national laws (e.g. the Austrian banking Act) applicable to a particular firm. Also modifications of general organisational requirements and a clarification of the duties of the compliance und risk management functions would be useful to ensure that risks are identified at an early stage. 25. Authorisation and organisational requirements Specific organisational requirements for the provision of the service of portfolio management / Conflicts of interest and sales process (questions 117 and 118) In our opinion specific organisational requirements, for example to retain documents concerning the definition and implementation of the investment strategies in managing clients portfolios prior to the provision of this service, would be very useful. We also support implementing measures regarding conflicts of interest relating to the remuneration of sales forces and the structure of incentives for the distribution of financial products. 11/13

12 VII. Further Convergence of the Regulatory Framework and of Supervisory Practices (Chapter 8) 26. Options and discretions Tied agents (Question 125 to 128) The FMA has had positive experiences with the institute of tied agents who are not allowed to hold client money or assets. Although an abolishment of the national discretion regarding tied agents is not one of our most important concerns we are not opposed to this step which would generally allow the use of tied agents in all Member States. We are very much in favour of the suggested clarifications and improvements of the requirements concerning the publishing of tied agents operating cross border. Such a publication should be mandatory regardless of whether they cooperate with an investment firm or credit institution. Furthermore we believe it is imperative to give investors the possibility to check the identity and regulatory status of any natural person acting for a tied agent. We therefore strongly suggest to introduce a regulatory requirement which obliges each entity using legal persons as tied agents to also register any natural person who can represent the tied agent. This measure would significantly increase transparency for investors and would help to restrict the possibility for natural persons to circumvent the tied agent-principle by cooperating with several legal persons as tied agents and/or different investment firms and credit institutions. 27. Supervisory Powers and Sanctions (Questions 134 to 137) The FMA supports the harmonisation of the sanctioning regimes in the EU also with regard to the MiFID provisions. This would to our opinion be an important step to avoid regulatory arbitrage in this area. Equally we support the introduction of an appropriate whistleblowing mechanism according to which internal information and suspicions of infringements of employees are provided to the relevant competent authority. We believe that such information could be a useful instrument for many supervisory purposes (e.g. insider dealing). We believe that there are many instances where an obligation to publish measures and sanctions especially with regard to violations of market conduct rules (in particular market manipulation) would be appropriate. 28. Third country firms (Questions 138 to 141) The supervision of third country firms on the same quality level as EU firms would in practice irrespective whether MoUs exist or not be extremely challenging. We are concerned that cooperation with third country authorities and access to information and relevant persons at these firms would especially in critical supervisory situations be difficult for various legal and practical reasons. Especially it has to be considered, that equivalence assessments are, due to the different general legal systems in third countries they have to take into account, often difficult to make. From a supervisory perspective we would therefore prefer not to change MiFID in this respect. 12/13

13 VIII. Reinforcement of supervisory powers in key areas (Chapter 9) 29. Ban on specific activities, products or practices (Questions 142 to 144) In order to ensure a level playing field in this important area we would like to emphasize that decisions on such bans should only be made on a European level through ESMA. 30. Stronger oversight of positions in derivatives, including commodity derivatives (questions 145 to 148) The FMA generally shares the view that position limits are useful tools to reduce systemic risks. However they cannot be seen as a one size fits all solution, as in this context also adverse effects on liquidity have to be taken into account as well. The FMA thinks that position limits would contribute to all objectives mentioned (i) to combat market manipulation; (ii) to reduce systemic risk; (iii) to prevent disorderly markets and developments detrimental to investors; and (iv) to safeguard the stability and delivery and settlement arrangements of physical commodity markets in the consultation paper. As article 4 of Directive 2003/124/EC states, a large position held by a person should be carefully considered as a relevant source for market and price impact. Therefore a position limit could be an efficient tool to combat certain kinds of manipulative behavior. Furthermore a limit to the exposure of centralised clearing houses could be considered as an instrument to safeguard the stability and delivery and settlement arrangements of physical commodity markets. However it has to be considered that the efficiency of measures to prevent disorderly markets significantly depends also on other influences regarding market stability than position sizes of individual market participants (question 146). The FMA believes that position limits should be applied by regulators to a) all types of market participants, b) to all types of activities and c) to the aggregate open interest (question 148). Yours sincerely Finanzmarktaufsichtsbehörde Bereich Integrierte Aufsicht Für den Vorstand Dr. Birgit Puck Dr. Christoph Kapfer, LLM, MBA elektronisch gefertigt 13/13

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