MAR publication channels: ESMA vs. EC
Monday, 18 July 2016 06:00

 

What was the essence of the dispute between the European Securities and Markets Authority (ESMA) and the European Commission as regards the inside information publications under REMIT and MAR?

Does it influence on the ongoing regulatory practice?

 

 



 

I hope you have noticed recent 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 in accordance with Regulation (EU) No 596/2014 of the European Parliament and of the Council.

 

Interesting piece of legislation, by the way, where the two key players, when it comes to European financial law: the European Commission and the European Securities and Markets Authority (ESMA), took the opposite positions, defended them consequently throughout the entire legislative process, and, what's equally important, remained until the end unconvinced by the other party.

 

The object of above dispute was a MAR (Market Abuse Regulation) secondary legislation, but the plot concentrated around emissions trading.

 

I dare to mention, moreover, the whole story has an extremely practical aspect. And its practicalities are not restricted to the contained group of wholesale energy market participants, already required to abide by REMIT and now being subject to MAR due to their significant emissions.

 

I suppose, everybody engaged in emissions trading has the legitimate legal interest to be duly informed about the market fundamentals, and must know for certain, where to seek for such information.

 

And, I'm afraid, after the whole correspondence between the European Commission and ESMA, and with the said final Regulation in hand, such hypothetical emissions market participant still will have some doubts:

 

- firstly, whether there will be dual system for inside information publications by emitters subject simultaneously to REMIT and MAR,

 

- secondly, whether the inside information under MAR must be unequivocally identified that it is as such (hence, it would mean that the same inside information, for example unplanned plant outage influencing significantly and simultaneously on the price of carbon as well as on electricity prices, must be published twice, once with the designation of the "REMIT inside information" and second, marked as "MAR inside information").

 

It needs to be explained, REMIT inside information disclosure regime concentrates on events influencing significantly on the prices of wholesale energy products (in brief: being electricity, natural gas, transportation and derivatives thereof), while for the MAR framework (where emission allowances are classified as financial instruments as from 3 January 2018) the price of carbon is important.

 

What's the point, then?

 

In its 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 of 17 June 2016 (ESMA/2016/982) ESMA notes that the draft ITS submitted by ESMA outlines two elements which can be considered different compared to the basic REMIT regime:

(1) the requirement to use disclosure channels that feature active dissemination; and

(2) the requirement to identify the information as inside information under MAR.

 

ESMA also stressed that "the requirement to identify the information as inside information under MAR is an essential feature of the disclosure regime laid down in MAR as it provides investors with the ability to effectively distinguish the inside information under MAR from the information to be disclosed under REMIT".

 

This, in the ESMA's opinion, is of the utmost importance considering the potentially large numbers of investors that, in the future, may invest in emission allowances and financial instruments linked to them (e.g. derivatives; investment funds units/shares; etc).

 



ESMA argued that only an emission allowance market participant (EAMP) disclosing inside information under REMIT to a platform that also provides an active dissemination, and marking the information as inside information for the purposes of MAR, should be considered as fulfilling the MAR disclosure requirements by reporting only once.

This, moreover, would ensure an equal treatment of all EAMPs.

 

Finally, ESMA noted that among the circa 70 entities that will be considered as EAMPs under MAR, around 35 are large energy companies who are also subject to REMIT.

 

It was the ESMA's opinion only. As follows, from the non-binding nature of the instrument like opinions, the European Commission was theoretically free to decide on the issue. What has happened next, then?

 

The aforementioned Commission Implementing Regulation (EU) 2016/1055 of 29 June 2016 described the whole issue in Recital 8, which reads:

"On 25 May 2016, the Commission notified ESMA of its intention to endorse the draft implementing technical standard with amendments to account for the fact that the disclosure provisions in Regulation (EU) No 1227/2011 are sufficient to ensure that emission allowance market participants disclose inside information publicly, effectively and in a timely manner, as required by Article 17(2) of Regulation (EU) No 596/2014. Commission Implementing Regulation (EU) No 1348/2014 [...] already obliges emission allowance market participants to provide 'web feeds' for the website-based disclosures to be made public, effectively and in a timely manner. In its formal opinion of 16 June 2016, ESMA confirmed its initial position and did not resubmit an implementing technical standard amended in a way consistent with the Commission's proposed amendments. Since the disclosure requirements for emission allowance market participants under Regulation (EU) No 1227/2011 may be sufficient for the purpose of complying with the requirements in Article 17(2) of Regulation (EU) No 596/2014, the draft implementing technical standard should be amended to avoid duplicative reporting requirements."

 

  


 

 

ESMA's key argument is that ACER does not require active dissemination of inside information covered by REMIT since the mechanism for web feeds under REMIT does not involve making such inside information available in the officially appointed mechanism (OAM), which is inherent to the MAR.

 

MAR prescribes that in addition to the disclosed inside information being posted on the issuer's website, where applicable, information should be also made available in the OAM under the Transparency Directive 2004/109/EC.

 

However, it is to be noted, inside information relating only to an emission allowance product is not required by the MAR to be maintained in the OAM, what ESMA itself stated in its Final Report of 28 September 2015, p. 42, 44.

 

Considering, moreover, the potentially increased bureaucratic burden, in my opinion the European Commission' stance is correct in this case.

 

However, given the role entrusted to ESMA in the oversight of the financial market, I'm afraid there is no certainty as regards regulatory practice concerning the problem in question.

 

Wordings of the ESMA's draft regulation and the final European Commission's text are in the boxes below - judge for yourself...

 

 

 

ESMA's Draft Commission Implementing Regulation 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 according to with Regulation (EU) No 596/2014 of the European Parliament and of the Council

 

Recitals 1 and 2

 

(1) The protection of investors requires timely public disclosure of inside information by issuers and emission allowance market participants. In order to guarantee at Union level equal access of investors to inside information, the inside information should be publicly disclosed free of charge, simultaneously and as fast as possible amongst all categories of investors throughout the Union and it should be communicated to the media which are relied upon by the public, ensuring an effective dissemination. The mere availability of inside information on a website only, even where users are provided with the possibility of being informed about the updated content of the website through subscription to a web feed, should not be considered sufficient for meeting the dissemination requirements included in this Regulation.

 

(2) Where emission allowance market participants already comply with equivalent inside information disclosure requirements pursuant to Regulation (EU) No 1227/20112, and are requested to publicly disclose the same information under that Regulation and Regulation (EU) No 596/2014, the obligations under this Regulation should be considered fulfilled by means of publication of the information in a platform for the disclosure of inside information used in the context of Regulation (EU) No 1227/2011, as long as the inside information is communicated to the media according to this Regulation.

 

Article 1
 Definitions


For the purposes of this Regulation, the following definition shall apply:
"electronic means" are means of electronic equipment for the processing (including digital compression), storage and transmission of data, employing wires, radio, optical technologies, or any other electromagnetic means.

 

Article 2
 Means for public disclosure of inside information


1. Issuers and emission allowance market participants shall disclose inside information using technical means that ensure:
a. Inside information is disseminated:
i. to as wide a public as possible on a non-discriminatory basis;
ii. free of charge;
iii. simultaneously throughout the Union.
b. Inside information is communicated, directly or through a third party, to the media which are reasonably relied upon by the public to ensure its effective dissemination. That communication shall be transmitted using electronic means that ensure the completeness, integrity and confidentiality of the information is maintained during the transmission, and it shall clearly identify:
i. that the information communicated is inside information;
ii. the identity of the issuer or emissions allowance market participant (full legal name);
iii. the identity of the person making the notification: name, surname, position within the issuer or emission allowance market participant;
iv. the subject matter of the inside information;
v. the date and time in which it is taking place. Issuers and emission allowance market participants shall ensure the security of receipt of such communication by remedying as soon as possible any failure or disruption in the communication of inside information.
2. Emission allowance market participants required to disclose inside information in accordance with Article 4 of Regulation (EU) No 1227/2011 may use the technical means established for the purpose of disclosing inside information under that Regulation for the disclosure of inside information under Article 17(2) of Regulation (EU) No 596/2014 insofar as the inside information required to be disclosed has substantially the same content, and provided that the technical means used ensure that the inside information is communicated to the media in accordance with paragraph 1.

 

Article 3
 Posting of inside information on a website


The websites referred to in Article 17(1) and (9) of Regulation (EU) No 596/2014 shall comply with the following requirements:
a. they allow users to access the inside information posted on the website in a non-discriminatory manner and free of charge;
b. they allow users to locate the inside information in an easily identifiable section of the website;
c. they ensure the disclosed inside information clearly indicates date and time of disclosure and is organised in chronological order.

 

 

 

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 in accordance with Regulation (EU) No 596/2014 of the European Parliament and of the Council

 

Recitals 1, 2

 

(1) The protection of investors requires effective and timely public disclosure of inside information by issuers and emission allowance market participants. In order to guarantee at Union level equal access of investors to inside information, the inside information should be publicly disclosed free of charge, simultaneously and as fast as possible amongst all categories of investors throughout the Union and it should be communicated to the media which ensure an effective dissemination to the public.

 

(2) Where emission allowance market participants already fulfil equivalent inside information disclosure requirements in accordance with Regulation (EU) No 1227/2011 of the European Parliament and of the Council, and where they are required to publicly disclose the same information under that Regulation and Regulation (EU) No 596/2014, the obligations under this Regulation should be considered to be fulfilled where the information is disclosed using a platform for the disclosure of inside information for the purposes of Regulation (EU) No 1227/2011, on the condition that the inside information is communicated to the relevant media.

 

Article 1

Definitions

 

For the purposes of this Regulation, the following definition shall apply:

 

'electronic means' are means of electronic equipment for the processing (including digital compression), storage and transmission of data, employing wires, radio, optical technologies, or any other electromagnetic means.

 

CHAPTER II

TECHNICAL MEANS FOR APPROPRIATE PUBLIC DISCLOSURE OF INSIDE INFORMATION

 

Article 2

Means for public disclosure of inside information

 

1. Issuers and emission allowance market participants shall disclose inside information using technical means that ensure:

 

(a) inside information is disseminated:

 

(i) to as wide a public as possible on a non-discriminatory basis;

 

(ii) free of charge;

 

(iii) simultaneously throughout the Union;

 

(b) inside information is communicated, directly or through a third party, to the media which are reasonably relied upon by the public to ensure its effective dissemination. That communication shall be transmitted using electronic means that ensure that the completeness, integrity and confidentiality of the information is maintained during the transmission, and it shall clearly identify:

 

(i) that the information communicated is inside information;

 

(ii) the identity of the issuer or emissions allowance market participant: full legal name;

 

(iii) the identity of the person making the notification: name, surname, position within the issuer or emission allowance market participant;

 

(iv) the subject matter of the inside information;

 

(v) the date and time of the communication to the media. Issuers and emission allowance market participants shall ensure the completeness, integrity and confidentiality by remedying any failure or disruption in the communication of inside information without delay.

 

2. Emission allowance market participants required to disclose inside information in accordance with Article 4 of Regulation (EU) No 1227/2011 may use the technical means established for the purpose of disclosing inside information under that Regulation for the disclosure of inside information under Article 17(2) of Regulation (EU) No 596/2014 provided the inside information required to be disclosed has substantially the same content and the technical means used for the disclosure ensure that the inside information is communicated to the relevant media.

 

Article 3

Posting of inside information on a website

 

The websites referred to in Article 17(1) and (9) of Regulation (EU) No 596/2014 shall comply with the following requirements:

 

(a) they allow users to access the inside information posted on the website in a non-discriminatory basis and free of charge;

 

(b) they allow users to locate the inside information in an easily identifiable section of the website;

 

(c) they ensure the disclosed inside information clearly indicates date and time of disclosure and that the information is organised in chronological order.

 

 

 

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