This newsletter aims to brief a wider community, particularly professionals in the early stage of their careers in the capital markets, on some of the issues where ICMA is engaged on behalf of its members. E-mail us at ICMAfutureleaders@icmagroup.org to comment.


MiFID, PG, PRIIPs, KID - the EU Alphabet Soup of Investor Protection


Key Takeaways

PG and PRIIPs came into effect in early January 2018.
Both intend to protect investors, by ensuring their needs and objectives are borne in mind and making information more accessible and comparable for retail investors.
The scope of the PRIIPs regulation is unclear and vanilla bond issuers do not seem to be willing to take on the liability associated with preparing a KID.
Statistics show a very significant reduction in issues of low denominkation vanilla bonds since the implementation of the new regimes.

Last year, two major pieces of investor protection legislation were causing headaches across the EU and beyond – the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation and a part of the Markets in Financial Instruments Directive (MiFID) II.

MiFID II product governance (PG) aims to better protect investors by making manufacturers more accountable for ensuring the products they are selling meet the needs of an identified target market. Meanwhile PRIIPs is centred on the production of a three-page key information document (KID); the aim of which is to make investment products more accessible and easily comparable for retail clients.

Since the beginning of the year, various ICMA members have reportedly been using the ICMA1 (“all bonds”/“professionals only”) and ICMA2 (“simple listed bonds”/“general retail”) approaches to address their obligations under the PG regime. For certain types of bonds, they have been using ICMA language restricting sales of bonds to EEA retail investors where there is no KID under the PRIIPs regulation.

ICMA has conducted an initial analysis of Dealogic’s new issue of non-financial corporation (NFC) data for indications of any impact of the new regime on the availability of vanilla bonds to general retail investors. The analysis by number and value of NFC issuances reveals a marked decrease in low denomination issuances, typically aimed at the retail market, in contrast to an increase in high denomination issuances, typically aimed at professional investors. It remains to be confirmed whether this very significant reduction in vanilla low denomination bonds (i) indicates an ongoing trend, (ii) is caused by the PRIIPs and/or PG regimes and/or (iii) will be a concern for European authorities (e.g. in the context of the EU’s defined CMU objectives). These initial results give food for thought in any case.




European green ambitions in action

The publication of the EU Action Plan that will deliver the EU 2030 climate and energy targets by tapping into the financial sector potential for green finance and sustainable investment.

The European Commission unveiled its plan to increase the financing for a sustainable future for the EU on 8 March. Out of the 10 priorities, many of the recommendations were based on the suggestions made in January by the team of experts the Commission appointed more than a year ago, with proposals including new standards to define green finance, new requirements on investors to consider sustainability, and a fresh push on climate risk disclosure.

ICMA supported the Action Plan, noting its breadth and ambition in promoting the transition to a sustainable economy. Certain proposals may however need adjustment to avoid creating unintended barriers to market development. The key challenge will be not to create regulatory complexity or legal uncertainty as the ultimate goal is to increase investment and finance for sustainable projects.

The follow-up dialogue between the Commission and the market on its Action Plan will take place via a Technical Expert Group on sustainable finance for which ICMA will submit its candidacy. Discussions will be divided into workstreams including green bond standards and green project classification starting with those aimed at climate change mitigation.




Key Takeaways

The European Commission has published an ambitious Action Plan to deliver the EU’s climate and energy targets by 2030.
The Action Plan is based on the High Level Expert Group (HLEG) report on sustainable finance published in January. ICMA was nominated to be an observer on the group.
The key challenge with the Action Plan will be to find the right balance in implementation, and not create regulatory complexity or legal uncertainty as the ultimate goal is to increase investment and finance for sustainable projects.
A new technical Expert Group will be formed to continue the dialogue between the European Commission and the market.

MiFID II/R - how transparent have bond markets become?


Key Takeaways

MiFID II/R intends to bring much of the transparency traditional in equity markets to bond trading. It entered into force on 3 January 2018.
The go-live appears to have been smoother than anticipated, without causing major market disruption.
ICMA members reported mixed experiences with regard to volumes of trading activity.
A general lack of harmonisation and common standards is hindering the transparency MiFID II/R was supposed to provide to the bond market.
A series of Q&A sessions organised by ICMA will hopefully provide better clarity to the market.

It might be an obscure acronym but anyone working in the world of finance is acutely aware of the significance of the Markets in Financial Instruments Directive II/R for trading which, after no less than seven years in the making, came into force on 3 January.

In very broad terms MiFID II/R aims to increase non-equity market transparency, efficiency and safety by building on stock trading regulation introduced in 2007 and moving a significant part of OTC trading onto regulated platforms. ICMA member experiences show mixed results.

MiFID II/R intends to bring bond trading transparency by applying pre-trade as well as post-trade transparency requirements. This results in a significant impact on the market structure of bond markets. Bond pre-and post-trade transparency requirements are calibrated for different types of bond market trading structures such as order-book, quote-driven, hybrid and periodic auction trading systems.

Under trade reporting rules, operators of trading venues and Systematic Internalisers (SIs) are required to make quotes and details of executed transactions publicly available, free of charge after 15 minutes, in a machine-readable format. However in the absence of common standards, the format in which data is published varies significantly, and in many instances, is not available for download. There are also significant discrepancies between the number of bonds deemed liquid and illiquid for trade reporting purposes.

More generally the fact that MiFID II, while setting out general objectives, granted EU member states room for interpretation resulting in a lack of harmonisation when it comes to certain provisions, affecting cross-border transactions within the EU.

Further reading – ESMA guidance in the first quarter on transparency; market structure topics; general MiFID II/R implementation.




FinTech jargon

FinTech has its own jargon and acronyms that make it hard to navigate sometimes. We put together a glossary to make it easier. We will be updating the glossary regularly.


A cryptocurrency or a category of cryptocurrencies that are an alternative to bitcoin. Many altcoins project themselves as better alternatives to bitcoin in various ways (e.g. more efficient, less expensive, etc.).

FIX protocol

Financial Information eXchange (FIX) is a vendor-neutral electronic communications protocol for international real-time exchange of securities transaction information, which is useful to funds, investment managers, and firms.

Genesis block

The first block of data that is processed and validated to form a new blockchain, often referred to as block 0 or block 1.





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