Coronavirus: EU agrees rules to make capital markets work for Europe’s recovery

The European Commission today welcomed the agreement reached by the European Parliament and the Council on important amendments to EU rules on investor protection and commodity derivatives (the Markets in Financial Instruments Directive (MiFID)). The Commission proposed these amendments on 24 July 2020 to reduce some of the administrative burdens that experienced investors face in their business-to-business relationships – without reducing protection for retail investors – and to increase the competitiveness of the EU’s commodity derivatives markets. The agreed amendments aim to make it easier for capital markets to support European businesses to recover from the crisis, by freeing up resources for both firms and investors. In particular, these new rules will mean that the level of information provided to clients, in particular professional clients such as large corporates and financial institutions, will now be more targeted to their needs. Information will no longer be provided on paper, except if retail clients specifically request so. Rules guiding the provision of research on small and mid-cap companies and on fixed income instruments will also be partially revisited. This is an important step to increase small and mid-cap companies’ visibility towards investors and this will contribute to the objectives of the Capital Markets Union. In addition, a reform of position limit rules for commodity derivatives includes a simpler test for the “real economy” companies to demonstrate why their trading in commodity derivatives forms a small part of their activities and the reform clarifies that there is no spill-over on any agricultural commodities. Mairead McGuinness, Commissioner for Financial Services, Financial Stability and the Capital Markets Union, said: “I welcome today’s agreement on the changes to MiFID. This will help make it easier for our markets to support European businesses during this difficult time. The changes remove requirements that were overly burdensome, without reducing the overall protection of retail investors, and will increase our global competitiveness on commodity derivatives markets.” The European Parliament and the Council also agreed today to solve an issue arising from a 6-month time gap between the transposition deadlines of the Investment Firms Directive (IFD) and investment firm rules contained in the Capital Requirements Directive (CRD5). The agreed amendments for MiFID will enter into application 1 year after publication in the Official Journal of the European Union, when Member States have transposed the changes into their national legislation.