Entry into force and application

This Regulation shall enter into force on the twentieth day following that of its publication in the
Official Journal of the European Union
.
It shall apply from the date that appears first in the second subparagraph of Article 93(1) of Directive 2014/65/EU.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 25 April 2016.
For the Commission
The President
Jean-Claude JUNCKER
(
1
)
OJ L 173, 12.6.2014, p. 349
.
(
2
)
Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (
OJ L 326, 8.12.2011, p. 1
).
(
3
)
Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (
OJ L 281, 23.11.1995, p. 31
).
(
4
)
Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (
OJ L 201, 31.7.2002, p. 37
).
(
5
)
Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (
OJ L 8, 12.1.2001, p. 1
).
(
6
)
Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (
OJ L 173, 12.6.2014, p. 1
).
(
7
)
Commission Delegated Directive (EU) 2017/593 of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits (see page 500 of this Official Journal).
(
8
)
Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (
OJ L 352, 9.12.2014, p. 1
).
(
9
)
Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (
OJ L 345, 31.12.2003, p. 64
).
(
10
)
Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (
OJ L 302, 17.11.2009, p. 32
).
(
11
)
Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (
OJ L 173, 12.6.2014, p. 84
).
(
12
)
Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on criminal sanctions for market abuse (market abuse directive) (
OJ L 173, 12.6.2014, p. 179
).
(
13
)
Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (
OJ L 390, 31.12.2004, p. 38
).
(
14
)
Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (
OJ L 331, 15.12.2010, p. 84
).
(
15
)
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (
OJ L 174, 1.7.2011, p. 1
).
(
16
)
Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (
OJ L 337, 23.12.2015, p. 1
).
(
17
)
Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (
OJ L 211, 14.8.2009, p. 55
).
(
18
)
Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (
OJ L 145, 30.4.2004, p. 1
).
(
19
)
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (
OJ L 275, 25.10.2003, p. 32
).
(
20
)
Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (
OJ L 201, 27.7.2012, p. 1
).
(
21
)
Directive 2013/11/EU of the European Parliament and the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR) (
OJ L 165, 18.6.2013, p. 63
).
(
22
)
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (
OJ L 176, 27.6.2013, p. 1
).
(
23
)
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (
OJ L 176, 27.6.2013, p. 338
).
(
24
)
Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (
OJ L 173, 12.6.2014, p. 190
).
(
25
)
Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (
OJ L 173, 12.6.2014, p. 149
).
(
26
)
Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (
OJ L 126, 26.5.2000, p. 1
).
(
27
)
Commission Delegated Regulation (EU) 2017/572 of 2 June 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards on the specification of the offering of pre-and post-trade data and the level of disaggregation of data (see page 142 of this Official Journal).
ANNEX I
Record-keeping
Minimum list of records to be kept by investment firms depending upon the nature of their activities
Nature of obligation
Type of record
Summary of content
Legislative reference
Client assessment
Information to clients
Content as provided for under Article 24(4) of Directive 2014/65/EU and Articles 39 to 45 of this Regulation
Article 24(4) MIFID II
Articles 39 to 45 of this Regulation
Client agreements
Records as provided for under Article 25(5) of Directive 2014/65/EU
Article 25(5) MIFID II
Article 53 of this Regulation
Assessment of suitability and appropriateness
Content as provided for under Article 25(2) and (3) of Directive 2014/65/EU and Article 50 of this Regulation
Article 25(2) and (3) of Directive 2014/65/EU
Articles 35, 36 and 37 of this Regulation
Order handling
Client order-handling — Aggregated transactions
Records as provided for under Articles 63 to 66 of this Regulation
Articles 24(1) and 28(1) of Directive 2014/65/EU
Articles 63 to 66 of this Regulation
Aggregation and allocation of trans-actions for own account
Records as provided for under Article 65 of this Regulation
Articles 28(1) and 24(1) of Directive 2014/65/EU
Article 65 of this Regulation
Client Orders and transactions
Record keeping of client orders or decision to deal
Records as provided for under Article 69 of this Regulation
Article 16(6) of Directive 2014/65/EU
Article 69 of this Regulation
Record keeping of transactions and order processing
Records as provided for under Article 70 of this Regulation
Article 16(6) of Directive 2014/65/EU
Article 70 of this Regulation
Reporting to clients
Obligation in respect of services provided to clients
Contents as provided for under Articles 53 to 58 of this Regulation
Article 24(1) and (6) and Article 25(1) and (6) of Directive 2014/65/EU
Articles 53 to 58 of this Regulation
Safeguarding of client assets
Client financial instruments held by an investment firm
Records as provided for under Article 16(8) of Directive 2014/65/EU and under Article 2 of Commission Delegated Directive (EU) 2017/593
Article 16(8) of Directive 2014/65/EU
Article 2 of Delegated Directive (EU) 2017/593
Client funds held by an investment firm
Records as provided for under Article 16(9) of Directive 2014/65/EU and under Article 2 of Delegated Directive (EU) 2017/593
Article 16(9) of Directive 2014/65/EU
Article 2 of Delegated Directive (EU) 2017/593
Use of client financial instruments
Records provided for under Article 5 of Delegated Directive (EU) 2017/593
Article 16(8) to (10) of Directive 2014/65/EU
Article 5 of Delegated Directive (EU) 2017/593
Communication with clients
Information about Costs and associated charges
Contents as provided for under Article 45 of this Regulation
Article 24(4)(c) of Directive 2014/65/EU
Article 45 of this Regulation
Information about the investment firm and its services, financial instruments and safe-guarding of client assets
Content as provided for under Articles 45 and 46 of this Regulation
Article 24(4) of Directive 2014/65/EU
Articles 45 and 46 of this Regulation
Information to clients
Records of communication
Article 24(3) of Directive 2014/65/EU
Article 39 of this Regulation
Marketing communications (except in oral form)
Each marketing communication issued by the investment firm (except in oral form) as provided under Articles 36 and 37 of this Regulation
Article 24(3) of Directive 2014/65/EU
Articles 36 and 37 of this Regulation
Investment advice to retail clients
(i) The fact, time and date that investment advice was rendered and (ii) the financial instrument that was recommended (iii) the suitability report provided to the client
Article 25(6) of Directive 2014/65/EU
Article 54 of this Regulation
Investment research
Each item of investment research issued by the investment firm in a durable medium
Article 24(3) of Directive 2014/65/EU
Articles 36 and 37 of this Regulation
Organisational requirements
The firm's business and internal organisation
Records as provided for under Article 21(1)(h) of this Regulation
Article 16(2) to (10) of Directive 2014/65/EU
Article 21(1)(h) of this Regulation
Compliance reports
Each compliance report to management body
Article 16(2) of Directive 2014/65/EU
Article 22(2)(b) and Article 25(2) of this Regulation
Conflict of Interest record
Records as provided for under Article 35 of this Regulation
Article 16(3) of Directive 2014/65/EU
Article 35 of this Regulation
Inducements
The information dis-closed to clients under Article 24(9) of Directive 2014/65/EU
Article 24(9) of Directive 2014/65/EU
Article 11 of Delegated Directive (EU) 2017/593
Risk management reports
Each risk management report to senior management
Article 16(5) of Directive 2014/65/EU
Article 23(1)(b) and Article 25(2) of this Regulation
Internal audit reports
Each internal audit report to senior management
Article 16(5) of Directive 2014/65/EU
Article 24 and Article 25(2) of this Regulation
Complaints-handling records
Each complaint and the complaint handling measures taken to address the complaint
Article 16(2) of Directive 2014/65/EU
Article 26 of this Regulation
Records of personal transactions
Records as provided for under Article 29(2)(c) of this Regulation
Article 16(2) of Directive 2014/65/EU
Article 29(2)(c) of this Regulation
ANNEX II
Costs and charges
Identified costs that should form part of the costs to be disclosed to the clients
(
1
)
Table 1
— All costs and associated charges charged for the investment service(s) and/or ancillary services provided to the client that should form part of the amount to be disclosed
Cost items to be disclosed
Examples:
One-off charges related to the provision of an investment service
All costs and charges paid to the investment firm at the beginning or at the end of the provided investment service(s).
Deposit fees, termination fees and switching costs
(
2
)
.
Ongoing charges related to the provision of an investment service
All ongoing costs and charges paid to investment firms for their services provided to the client.
Management fees, advisory fees, custodian fees.
All costs related to transactions initiated in the course of the provision of an investment service
All costs and charges that are related to transactions performed by the investment firm or other parties.
Broker commissions
(
3
)
, entry- and exit-charges paid to the fund manager, platform fees, mark ups (embedded in the transaction price), stamp duty, transactions tax and foreign exchange costs.
Any charges that are related to ancillary services
Any costs and charges that are related to ancillary services that are not included in the costs mentioned above.
Research costs.
Custody costs.
Incidental costs
Performance fees
Table 2
— All costs and associated charges related to the financial instrument that should form part of the amount to be disclosed
Cost items to be disclosed
Examples:
One-off charges
All costs and charges (included in the price or in addition to the price of the financial instrument) paid to product suppliers at the beginning or at the end of the investment in the financial instrument.
Front-loaded management fee, structuring fee
(
4
)
, distribution fee.
Ongoing charges
All ongoing costs and charges related to the management of the financial product that are deducted from the value of the financial instrument during the investment in the financial instrument.
Management fees, service costs, swap fees, securities lending costs and taxes, financing costs.
All costs related to the transactions
All costs and charges that incurred as a result of the acquisition and disposal of investments.
Broker commissions, entry- and exit-charges paid by the fund, mark ups embedded in the transaction price, stamp duty, transactions tax and foreign exchange costs.
Incidental costs
Performance fees
(
1
)
It should be noted that certain cost items appear in both tables but are not duplicative since they respectively refer to costs of the product and costs of the service. Examples are the management fees (in table 1, this refers to management fees charged by an investment firm providing the service of portfolio management to its clients while in Table 2 it refers to management fees charged by an investment fund manager to its investor) and broker commissions (in Table 1, they refer to commissions incurred by the investment firm when trading on behalf of its clients while in Table 2 they refer to commissions paid by investment funds when trading on behalf of the fund).
(
2
)
Switching costs should be understood as costs (if any) that are incurred by investors by switching from one investment firm to another investment firm.
(
3
)
Broker commissions should be understood as costs that are charged by investment firms for the execution of orders.
(
4
)
Structuring fees should be understood as fees charged by manufacturers of structured investment products for structuring the products. They may cover a broader range of services provided by the manufacturer.
ANNEX III
Requirement for operators of trading venues to immediately inform their national competent authority
SECTION A
Signals that may indicate significant infringements of the rules of a trading venue or disorderly trading conditions or system disruptions in relation to a financial instrument
Significant infringements of the rules of a trading venue
1.
Market participants infringe rules of the trading venue which aim to protect the market integrity, the orderly functioning of the market or the significant interests of the other market participants; and
2.
A trading venue considers that an infringement is of sufficient severity or impact to justify consideration of disciplinary action.
Disorderly trading conditions
3.
The price discovery process is interfered with over a significant period of time;
4.
The capacities of the trading systems are reached or exceeded;
5.
Market makers/liquidity providers repeatedly claim mis-trades; or
6.
Breakdown or failure of critical mechanisms under Article 48 of Directive 2014/65/EU and its implementing measures which are designed to protect the trading venue against the risks of algorithmic trading.
System disruptions
7.
Any major malfunction or breakdown of the system for market access that results in participants losing their ability to enter, adjust or cancel their orders;
8.
Any major malfunction or breakdown of the system for the matching of transactions, that results in participants losing certainty over the status of completed transactions or live orders as well as unavailability of information indispensable for trading (e.g., index value dissemination for trading certain derivatives on that index);
9.
Any major malfunction or breakdown of the systems for the dissemination of pre- and post-trade transparency and other relevant data published by trading venues in accordance with their obligations under Directive 2014/65/EU and Regulation (EU) No 600/2014;
10.
Any major malfunction or breakdown of the systems of the trading venue to monitor and control the trading activities of the market participants; and any major malfunction or breakdown in the sphere of other interrelated services providers, in particular CCPs and CSDs, that has repercussions on the trading system.
SECTION B
Signals that may indicate abusive behaviour under Regulation (EU) No 596/2014
Signals of possible insider dealing or market manipulation
1.
Unusual concentration of transactions and/or orders to trade in a particular financial instrument with one member/participant or between certain members/participants.
2.
Unusual repetition of a transaction among a small number of members/participants over a certain period of time.
Signals of possible insider dealing
3.
Unusual and significant trading or submission of orders to trade in the financial instruments of a company by certain members/participants before the announcement of important corporate events or of price sensitive information relating to the company; orders to trade/transactions resulting in sudden and unusual changes in the volume of orders/transactions and/or prices before public announcements regarding the financial instrument in question.
4.
Whether orders to trade are given or transactions are undertaken by a market member/participant before or immediately after that member/participant or persons publicly known as linked to that member/participant produce or disseminate research or investment recommendations that are made publicly available.
Signals of possible market manipulation
The signals described below in points 18 to 23 are particularly relevant in an automated trading environment.
5.
Orders to trade given or transactions undertaken which represent a significant proportion of the daily volume of transactions in the relevant financial instrument on the trading venue concerned, in particular when these activities lead to a significant change in the price of the financial instruments.
6.
Orders to trade given or transactions undertaken by a member/participant with a significant buying or selling interest in a financial instrument which lead to significant changes in the price of the financial instrument on a trading venue.
7.
Orders to trade given or transactions undertaken which are concentrated within a short time span in the trading session and lead to a price change which is subsequently reversed.
8.
Orders to trade given which change the representation of the best bid or offer prices in a financial instrument admitted to trading or traded on a trading venue, or more generally the representation of the order book available to market participants, and are removed before they are executed.
9.
Transactions or orders to trade by a market/participant with no other apparent justification than to increase/decrease the price or value of, or to have a significant impact on the supply of or demand for a financial instrument, namely near the reference point during the trading day, e.g. at the opening or near the close.
10.
Buying or selling of a financial instrument at the reference time of the trading session (e.g. opening, closing, settlement) in an effort to increase, to decrease or to maintain the reference price (e.g. opening price, closing price, settlement price) at a specific level (usually known as marking the close).
11.
Transactions or orders to trade which have the effect of, or are likely to have the effect of increasing/decreasing the weighted average price of the day or of a period during the session.
12.
Transactions or orders to trade which have the effect of, or are likely to have the effect of, setting a market price when the liquidity of the financial instrument or the depth of the order book is not sufficient to fix a price within the session.
13.
Execution of a transaction, changing the bid-offer prices when this spread is a factor in the determination of the price of another transaction whether or not on the same trading venue.
14.
Entering orders representing significant volumes in the central order book of the trading system a few minutes before the price determination phase of the auction and cancelling these orders a few seconds before the order book is frozen for computing the auction price so that the theoretical opening price might look higher or lower than it otherwise would do.
15.
Engaging in a transaction or series of transactions which are shown on a public display facility to give the impression of activity or price movement in a financial instrument (usually known as painting the tape).
16.
Transactions carried out as a result of the entering of buy and sell orders to trade at or nearly at the same time, with the very similar quantity and similar price by the same or different but colluding market members/participants (usually known as improper matched orders).
17.
Transactions or orders to trade which have the effect of, or are likely to have the effect of bypassing the trading safeguards of the market (e.g. as regards volume limits; price limits; bid/offer spread parameters; etc.).
18.
Entering of orders to trade or a series of orders to trade, executing transactions or series of transactions likely to start or exacerbate a trend and to encourage other participants to accelerate or extend the trend in order to create an opportunity to close out/open a position at a favourable price (usually know as momentum ignition).
19.
Submitting multiple or large orders to trade often away from the touch on one side of the order book in order to execute a trade on the other side of the order book. Once that trade has taken place, the manipulative orders will be removed (usually known as layering and spoofing).
20.
Entry of small orders to trade in order to ascertain the level of hidden orders and particularly used to assess what is resting on a dark platform (usually know as ping order).
21.
Entry of large numbers of orders to trade and/or cancellations and/or updates to orders to trade so as to create uncertainty for other participants, slowing down their process and to camouflage their own strategy (usually known as quote stuffing).
22.
Posting of orders to trade, to attract other market members/participants employing traditional trading techniques (‘slow traders’), that are then rapidly revised onto less generous terms, hoping to execute profitably against the incoming flow of ‘slow traders’ orders to trade (usually known as smoking).
23.
Executing orders to trade or a series of orders to trade, in order to uncover orders of other participants, and then entering an order to trade to take advantage of the information obtained (usually known as phishing).
24.
The extent to which, to the best knowledge of the operator of a trading venue, orders to trade given or transactions undertaken show evidence of position reversals in a short period and represent a significant proportion of the daily volume of transactions in the relevant financial instrument on the trading venue concerned, and might be associated with significant changes in the price of a financial instrument admitted to trading or traded on the trading venue.
Signals for cross-product market manipulation, including across different trading venues
The signals described below should be particularly considered by the operator of a trading venue where both a financial instrument and related financial instruments are admitted to trading or traded or where the above mentioned instruments are traded on several trading venues operated by the same operator.
25.
Transactions or orders to trade which have the effect of, or are likely to have the effect of increasing/decreasing/maintaining the price of a financial instrument during the days preceding the issue, optional redemption or expiry of a related derivative or convertible;
26.
Transactions or orders to trade which have the effect of, or are likely to have the effect of maintaining the price of the underlying financial instrument below or above the strike price, or other element used to determine the pay-out (e.g. barrier), of a related derivative at expiration date;
27.
Transactions which have the effect of, or are likely to have the effect of modifying the price of the underlying financial instrument so that it surpasses/not reaches the strike price, or other element used to determine the pay-out (e.g. barrier), of a related derivative at expiration date;
28.
Transactions which have the effect of, or are likely to have the effect of modifying the settlement price of a financial instrument when this price is used as a reference/determinant, namely, in the calculation of margins requirements;
29.
Orders to trade given or transactions undertaken by a member/participant with a significant buying or selling interest in a financial instrument which lead to significant changes in the price of the related derivative or underlying asset admitted to trading on a trading venue;
30.
Undertaking trading or entering orders to trade in one trading venue or outside a trading venue (including entering indications of interest) with a view to improperly influencing the price of a related financial instrument in another or in the same trading venue or outside a trading venue (usually known as cross-product manipulation (trading on financial instrument to improperly position the price of a related financial instrument in another or in the same trading venue or outside a trading venue)).
31.
Creating or enhancing arbitrage possibilities between a financial instrument and another related financial instrument by influencing reference prices of one of the financial instruments can be carried out with different financial instruments (like rights/shares, cash markets/derivatives markets, warrants/shares, …). In the context of rights issues, it could be achieved by influencing the (theoretical) opening or (theoretical) closing price of the rights.
ANNEX IV