Market Abuse Directive (MAD I & II) and Market Abuse Regulation (MAR)

Background

Published in 2003, the EU Market Abuse Directive (MAD) sought to implement an EU-wide market abuse regime. But since the implementation of that directive, the increasingly global nature of financial markets and the development of new trading platforms meant that MAD was soon outdated.

So therefore due to those issues and the manipulation of certain benchmarks such as LIBOR (London Interbank Offered Rate) it was decided during a scheduled review that the development of a new legislation was required.

In 2014 the Market Abuse Regulation (MAR) and the Directive on Criminal Sanctions for Market Abuse (CSMAD and, together with MAR, MAD II) were published in the Official Journal. MAR went live on the 3rd July 2016.

MAR seeks to enhance and harmonise the EU regime on market abuse. It increases the scope of existing offences and has introduced new offences such as attempted insider dealing, manipulation of benchmarks and commodities and has enhanced requirements on firms operating in the EU financial markets. MAR applies directly in each EU member state without requiring states to produce laws that implement MAR's provisions. CSMAD requires each Member State to implement legislation to ensure that market abuse is a criminal offence which can be effectively punished. Together, MAD II seeks to improve confidence in the integrity of the European financial markets.

How does MAR interact with MiFID II?

MiFID II is the recast markets in financial instruments directive, comprising a directive (Directive 2014/65/EU) and a regulation (Regulation 600/2014/EU). Broadly, MiFID II updates and extends the regulation of financial services in Europe.

MAR makes multiple references to MiFID II. While the two pieces of legislation are intended to interact, they have always been on staggered implementation timetables. Implementation of MiFID II has been delayed by 12 months to 3 January 2018, MAD II has an implementation date of 3 July 2016 with no proposal for delay.

Until MiFID II is implemented, MAR references to MiFID II are to be read as references to MiFID I, using the correlation table set out in Annex IV to MiFID II. The effect of this is that the scope of MAD II will broaden in January 2018 as MiFID II will bring a range of additional financial instruments into scope of MAD II.

Technical standards and delegated acts

On the 26 July 2016, ESMA published its final implementing technical standards (ITS) regarding sanctions and measures which will implement the Market Abuse Regulation.

ESMA Q&A

On 13 July 2016 ESMA updated their Market Abuse Regulation Q&A


Last updated: 1 August 2016