FEDERATION OF EUROPEAN SECURITIES EXCHANGES (FESE)
Rue du Lombard, 41
B-1000 Bruxelles
T (0032 2) 551.01.80
F
512.49.05
www.fese.org
W268/8 - FINAL
Brussels, 15th December 2004
Open Letter from European Exchanges to the European Institutions and CESR
Important Issues in the context of the Market Abuse Directive
and its Implementation in EU Member States
FESE is the representative organisation of Europe’s Regulated Markets for securities and
derivatives and has incorporated EACH, the European Association of Central Counterparty
Clearing Houses. Our Membership comprises all 25 Member States of the EU, as well as the
countries of the EFTA (Iceland, Norway, and Switzerland).
The opinions expressed in this letter represent the views of the entire FESE Membership at this
juncture. Individual Members will continue to participate in the discussion and will do so on
both the national and the European level. Moreover, the Federation as well as some of its
Members will explicitly respond to CESR’s recent paper (04-505) with preliminary guidance and
information on the common operation of level III of the Market Abuse Directive.
The primary and core goal of the Federation is to represent its Members’ views relating to the
gradual establishment of the integrated capital markets of Europe. It is from this perspective that
the Federation has actively participated in the framework of the Financial Services Action Plan
and beyond. It is from that same angle we have carefully analysed developments in relation to
the Market Abuse Directive. Some of these developments give rise to serious concerns which we
wish to express in this open letter.
The Market Abuse Directive is the first of the FSAP Directives to enter into the level III stage.
Its significance lies hence not only in its substance but also in procedural aspects of its
implementation and application, as it will serve as a precedent for other FSAP legislation. It is
also in this context that we publish this Open Letter.
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FESE Open Letter on MAD Implementation
1. Avoiding overlap of supervision
FESE acknowledges that the assignation of regulatory competences is of great importance. The
Members of the Federation – as far as they are Exchanges – are at present involved in the
process of market supervision in different ways. FESE is concerned that the performance of
supervisory functions by both, Regulators and the Exchanges, may and will in certain areas
create overlaps. If the same tasks are performed by Exchanges and in parallel by regulators,
unnecessary costs will arise. Even more serious, there is the risk of legal uncertainty and/or
conflicting regulatory approaches and decisions.
It must be possible that in each country, depending on local competencies and historical
relationship between the Regulator and the Exchange, the distribution of the supervision
tasks is arranged between them in full co-operation with an objective to avoid overlap,
areas of uncertainty and any vacuum.
FESE and its Members are also concerned about the possibility of an issuer becoming subject to
supervision from more than one Competent Authority. In respect to disclosure of directors’
holdings, this issue is taken care of in the level 2 rules; however it still exists in respect to the
handling of insider lists (see also below under 4) and ongoing disclosure obligations.
2. Accepted market practices
As a consequence of Member States’ discretionary powers, it is important that regulators agree
among themselves on harmonised solutions in the field of accepted market practices. Exchange
participants (investment firms and others) should not be allowed or required to act in very
different ways in relation to the same transaction in similar or identical market models. In order
to ensure the smooth functioning of markets, it seems necessary to further elaborate on accepted
market practices.
In order to ensure the smooth functioning of markets, it seems necessary for CESR to elaborate
further on accepted market practices. As a consequence of Member States’ discretionary powers,
it is important that regulators agree among themselves on workable solutions in the field of
accepted market practices. Regulators should work together to ensure that Exchange participants
(investment firms and others) are not allowed or required to act in very different ways in relation
to the same transaction in similar or identical market models.
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FESE Open Letter on MAD Implementation
The Federation advocates a system of open lists based on decisions and positions taken by
regulators and/or courts which could be regularly updated by simple publication on
CESR’s website. Such a system would allow for an appropriate reaction to market
problems. For us, a closed list of accepted market practices (even with a review
mechanism) would not be an optimum taking into account fast pace of market
developments.
FESE urges CESR to strive for great transparency and flexibility in the operation of such a list.
3. Immediate, prompt or as soon as possible?
Members of the Federation have noticed that there are potential differences between national
legislation concerning disclosure requirements of inside information. Several national draft laws
go beyond the provision of the Directive by introducing a concept of an “immediate” or a
“prompt” disclosure of inside information, while the Directive only requires a disclosure taking
place “as soon as possible”. This is clearly not only a purely semantic problem.
FESE underlines a need for harmonisation and consistent wording in national legislations.
This is crucial to maintain level playing field across all 25 Member States, so that all
investors get equitable access to information flows.
4. List of insiders
FESE has observed differences in national approaches in relation to the handling of a list of
insiders. Besides, the publication of this list would lead companies not only to reveal the names
of internal key persons but also some external commercial relationships.
FESE stresses a need to ensure that a high level of consistency is reached across Europe on
the operational issues with regard to insider lists. It is incompatible with the concept of a
Single Market if issuers were faced with different legislation in each Member State where
their securities are admitted to trading, with or without their consent. Full publication of
the list could also lead to unwanted dissemination of commercial relationships.
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FESE Open Letter on MAD Implementation
5. Delay of publication of managers transactions
In relation to transactions by persons discharging managerial responsibilities and persons closely
associated, FESE urges for a flexible approach in the disclosure mechanism. A strict observance
of a 5 working day period between the transaction and the publication of it must on the other
hand be ensured. Disclosure of these transactions by the issuer should be allowed as it is
probably the most practical way of handling the matter.
6. Overregulation
FESE and its Members would once again like to emphasis the danger of overregulation. Legal
and regulatory approaches and structures should remain flexible to allow for a proper functioning
of primary capital markets in Europe and of the (secondary) securities markets.
The new IFRS, the provisions of the Prospectus and Transparency Directives, the introduction of
Corporate Governance Codes and legislation, and last but not least the Market Abuse Directive,
including the follow-up of the list and the logbook of insiders are putting new and important
burdens on listed companies. To this must be added the increasing cost of public-hand expenses
for supervision and control by regulators, which will, as we fear, also partially be passed on to
issues (and to all other supervised and regulated entities). This could lead to a severe diminishing
or even drying up of new listings as well as a wave of de-listings in Europe which would not be
without consequences on the economical growth.
It must be in the interest of Europe to remain the competitive market place for both raising
new capital and re-allocating capital on secondary markets. The Federation and its
Members urge all institutions involved to create the framework in which Europe’s
businesses can raise capital and investors can exploit investment opportunities in an
efficient and barrier-free way.
x–x–x
We trust that the European Institutions, CESR, and regulators and legislators in Member States
will find our comments useful in their deliberations. We are of course available for the
discussion of any related matters and we look forward to further good co-operation.
Yours sincerely,
Vincent Van Dessel
Chair of the FESE Task Force
on the Market Abuse Directive
Paul Arlman
Secretary General, FESE
arlman@fese.org
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