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<\/div>\n<\/div>\t\t<\/div>\n\t<\/div>\n<\/div><\/div>MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVES AND REGULATION (MIFID, MIFIR)<\/h2>\n
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The main objectives of MiFID (II) are to strengthen investor protection, increase transparency, efficiency and resilience of European financial markets and enhanced competition among financial institutions.<\/p>\n
Who must comply with the directive?<\/strong><\/p>\n MiFID II applies to investment firms, market operators, and data reporting services providers. Certain provisions are also applied to credit institutions providing investment services \/ activities.<\/p>\n What activities are covered by the Directive?<\/strong><\/p>\n Investment services and activities within scope of MiFID II include inter alia dealing, underwriting, placing, portfolio management and investment advice and ancillary services such as investment research.<\/p>\n Which products fall within the scope of the directive?<\/strong><\/p>\n Products within scope of MiFID II include transferrable securities (e.g. bonds, structured products, and shares negotiable on the capital market), derivatives (including commodity derivatives), units in collective investment schemes and structured deposits.<\/p>\n Why does this have an impact on structured products?<\/strong><\/p>\n https:\/\/www.esma.europa.eu\/publications-and-data\/interactive-single-rulebook\/mifid-ii<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text] A disclosure document called a Key Information Document (KID) must be produced for each eligible product and must be available before the product is sold to retail investors. The KID is a short summary of the product which should be easily understandable to a retail investor. It contains answers to key questions retail investors may have on features, risks and the costs of the products. The key information document shall be a stand-alone document, clearly separate from marketing materials and shall be written in the official languages, or in one of the official languages, used in the part of the Member State where the PRIIP is distributed, or in another language accepted by the competent authorities of that Member State.<\/p>\n Why does this have an impact on structured products?<\/strong><\/p>\n Most structured products, being considered complex products, must have a KID if the distributor wishes to propose them to retail clients. The KID shall be accurate, fair, clear and not misleading. It shall be a stand-alone document, clearly separate from marketing materials.<\/p>\n https:\/\/eur-lex.europa.eu\/eli\/reg\/2014\/1286\/oj\/eng<\/a><\/p>\n https:\/\/finance.ec.europa.eu\/consumer-finance-and-payments\/retail-financial-services\/key-information-documents-packaged-retail-and-insurance-based-investment-products-priips_en<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text] Why does this have an impact on structured products?<\/strong><\/p>\n Approved Prospectuses are required for securities, including structured products, offered to the public in the EU, and\/or admitted to trading on one or more EU regulated markets. The documents to be registered are, among others, the following ones:<\/p>\n https:\/\/finance.ec.europa.eu\/capital-markets-union-and-financial-markets\/financial-markets\/securities-markets\/securities-prospectus_en#legislation<\/a><\/p>\n https:\/\/www.luxse.com\/regulation\/prospectus-regime<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text] The EMIR regulation has a significant impact on structured products, mainly because their composition is often linked to derivatives (swaps, options, futures contracts, etc\u2026) which fall under EMIR.<\/p>\n https:\/\/finance.ec.europa.eu\/capital-markets-union-and-financial-markets\/financial-markets\/post-trade-services\/derivatives-emir_en<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text] https:\/\/eur-lex.europa.eu\/eli\/reg\/2016\/1011\/oj\/eng<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text] https:\/\/eur-lex.europa.eu\/legal-content\/EN\/TXT\/?uri=CELEX:32019R2088<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text] https:\/\/eur-lex.europa.eu\/eli\/reg\/2014\/596\/oj\/eng<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text] Although it does not directly target structured products, it has an indirect but significant impact on their security, liquidity, and operational processing.<\/p>\n https:\/\/finance.ec.europa.eu\/capital-markets-union-and-financial-markets\/financial-markets\/post-trade-services\/settlement-finality_en<\/a><\/p>\n Most structured products in Europe settle through the Delivery versus Payment (DVP) mechanism. The DVP is a securities settlement mechanism defined by the European Securities and Markets Authority (ESMA) under the Central Securities Depositories Regulation (CSDR), which links a securities transfer with a cash transfer to ensure the delivery of securities happens if and only if the corresponding payment is made. In essence, DVP eliminates the “principal risk” that a party might deliver securities without receiving payment, or vice versa, ensuring a safe and simultaneous exchange of ownership.<\/p>\n https:\/\/www.esma.europa.eu\/esmas-activities\/markets-and-infrastructure\/central-securities-depositories<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text] Although DORA does not directly target structured products, its impact is significant due to their dependence on IT systems, data, and third-party technology providers. Issuers and distributors of structured products must test their infrastructure (e.g., trading platforms, back-office systems) and correct any flaws. They must also ensure that valuation, settlement, and reporting systems for structured products are well protected from cyber-attacks and that they remain operational even in the event of a crisis.<\/p>\n https:\/\/eur-lex.europa.eu\/eli\/reg\/2022\/2554\/oj\/eng<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text] Although these texts do not directly target structured products, they have a significant impact on their design, marketing, and risk, particularly due to their dependence on bank issuers and resolution mechanisms. Structured products are often issued by banks or depend on their financial health (e.g., guarantees, underlying assets). Structured products issued in the form of EMTN and\/or Certificates may be subject to bail-in, by being cancelled or converted, if the issuing bank is in resolution.<\/p>\n https:\/\/finance.ec.europa.eu\/banking\/banking-regulation\/bank-recovery-and-resolution_en<\/a>[\/vc_column_text][vc_empty_space height=”40px”]\t\t<\/div>\n\t<\/div>\n<\/div><\/div> [\/vc_column_text]\n
PACKAGED RETAIL AND INSURANCE-BASED INVESTMENT PRODUCTS REGULATION (PRIIPS)<\/h2>\n
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PROSPECTUS DIRECTIVE<\/h2>\n
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EUROPEAN MARKET INFRASTRUCTURE REGULATION (EMIR)<\/h2>\n
BENCHMARK REGULATION (BMR)<\/h2>\n
SFDR REGULATION (SUSTAINABLE FINANCE DISCLOSURE REGULATION)<\/h2>\n
MARKET ABUSE REGULATION (MAR)<\/h2>\n
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SETTLEMENT FINALITY DIRECTIVE (SFD) & CENTRAL SECURITIES DEPOSITORIES REGULATION (CSDR)<\/h2>\n
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DIGITAL OPERATIONAL RESILIENCE ACT (DORA)<\/h2>\n
BANK RECOVERY AND RESOLUTION<\/h2>\n
SECURITIES FINANCING TRANSACTIONS REGULATION (SFTR)<\/h2>\n