- The goal is to meet international standards on transparency, efficiency and stability
- The penalties rise to a maximum of five million euros or 10% of the turnover for very serious cases
- The commissions of the regulated markets must be transparent, equitable and non-discriminatory
The Council of Ministers has approved the Royal Decree-Law of measures for the transposition into Spanish law of the European Directive of Markets and Financial Instruments, known as MIFID II, in relation to trading centers. With this decision, the operation of the financial markets in Spain is homologated with international standards, which implies improvements in aspects such as transparency, efficiency and stability of the markets. New requirements regarding corporate governance are also introduced for the governing bodies of these markets in matters such as appointments and conflicts of interest. The penalties for non-compliance with the new regulations amount to a maximum of five million euros or 10% of the annual turnover in the case of very serious ones. The entry into force is January 3, 2018.
The RDL of urgent measures for adaptation to Spanish law to EU regulations on the stock market It contains a first part divided into three titles that include the rules of organization and operation of regulated markets, multilateral trading systems (SMN) and organized contracting systems (SOCs), as well as some provisions related to the powers of the National Stock Market Commission (CNMV) that affects all types of markets. In a second part the new sanctioning regime is included.
Regarding regulated markets, the operating and organization requirements imposed by MIFID II for the markets and the governing bodies are included. These markets are what are now known as official secondary markets, for example, the Stock Exchanges, AIAF (fixed income), and MEFF (derivatives). The governing bodies will be responsible for ensuring compliance with the new requirements imposed under the supervision of the CNMV. In addition, they must have a nominating committee.
These markets must meet new obligations in order to make them more transparent and efficient. Specifically, they must implement systems and procedures that allow the detection of conflicts of interest between their members, the market and the governing body; ensure orderly negotiation; ensure that there are sufficient market makers, which facilitates the depth and liquidity of the market; and allow the management of operational risks to which they are exposed, such as the possible anomalies caused by algorithmic trading (that is, in which investment decisions are made by machines according to algorithms) or episodes of excessive volatility.
Commissions on regulated markets must be transparent, equitable and non-discriminatory. No incentives will be created to place, modify or cancel orders or to execute operations in a way that contributes to disrupting the trading conditions or fostering market abuse practices.
As regards the negotiation in regulated markets, the governing bodies will have to comply with additional obligations of communicating the suspensions and exclusions to the competent authorities, aimed at guaranteeing the full effectiveness of the measure in different negotiating centers and different jurisdictions. They must also notify the CNMV of significant violations of their rules, anomalies in the trading conditions or possible actions prohibited by the market abuse regulations.
The RDL also contemplates the operation and organization requirements imposed by MIFID II to the Multilateral Trading Systems (SMN) and Organized Contracting Systems (SOC), a newly created figure. SMNs are multilateral systems in which shares or fixed income are exchanged primarily between different agents. They function as alternative markets with lower requirements for issuers, and therefore, more accessible for smaller companies. In Spain they are the Alternative Stock Market (MAB) and the Alternative Fixed Income Market (MARF). SOCs are a multilateral system, which is not a regulated market or a multilateral trading system, in which the various interests of buying and selling bonds and bonds, securitisations, emission rights or derivatives of multiple third parties interact to give rise to to contracts.
The standard passed today allows investment service companies to establish SOCs; the standards so far in force apply only to SMNs also to SOCs; and the rules of access and operation of these both types of centers derived from MIFID II are determined. In general, SMN and SOC are enforced with some relevant obligations that are now imposed on regulated markets. In this way, certain operating requirements are applied such as: the obligation of system resistance, the implementation of volatility management mechanisms, the provisions that regulate electronic negotiation and the obligation to synchronize clocks, all of which are provided for the governing bodies of regulated markets. It also highlights the application in SMN and SOC of the rules on suspension and exclusion of financial instruments that regulated markets must comply with, and on the supervision of compliance with the rules of these trading centers. Finally, information obligations are added to the CNMV on the operation of SMN and SOC.
Also specific to MIFID II are the specific requirements for SMN and the specific requirements for SOCs that are organizational and resource-sufficient. Likewise, the denomination “expanding SME market” is incorporated into our system for those in which SME shares are quoted and meet certain requirements. These negotiation centers will have a favorable regulatory treatment in European regulations and will allow them to promote the access of SMEs to the capital market, improving their financing possibilities.
Finally, some articles are also included with the preventive measures that the CNMV may impose in relation to markets in other Member States when they operate cross-border in Spain and these do not comply with the regulations and the authority of the home Member State does not take sufficient measures .
The last part of the RDL develops the sanctioning regime. First, it is clarified that the provisions common to all sanctions that regulate aspects such as instruction or the prescription of sanctions continue to apply. Subsequently, the offenses are classified as very serious and serious and the penalties are established. The maximum limit of very serious sanctions is raised following the directive. Currently, this limit is 600,000 euros, five times the profit obtained, 5% of own resources, or funds used in the activity that led to the infringement, whichever is greater. It rises to 5,000,000 euros or 10% of the total annual turnover, whichever is greater. Similar violations are carried out (2,500,000 or 5% of the annual turnover, compared to 300,000 or twice the profit obtained or 2% of own resources or funds used in the current regime).
