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This is the fifth in our series of briefings on MiFID and MiFIR. Below, we describe new powers of product intervention granted to ESMA and local regulators under MiFIR and new obligations set out in MiFID for regulated markets to have in place measures to ensure systems’ resilience, including circuit breakers and controls over algorithmic trading.
1. MiFIR Article 32 (Product intervention by competent authorities): A regulator may prohibit or restrict the marketing, distribution or sale of a particular financial instrument, a “financial instrument with certain features” or a type of financial activity or price if satisfied on reasonable grounds that: (i) the instrument or activity gives rise to significant investor protection concerns or poses a serious threat to the orderly functioning and integrity of financial markets or systemic stability; (ii) existing regulatory requirements are insufficient to address the risk(s) and the issue would not be better addressed by supervision or enforcement measures; (iii) the action is proportionate; (iv) consultation with other affected regulators has taken place; and (v) the action will not have a discriminatory effect elsewhere in the European Union.
2. MiFIR Article 31 (ESMA powers to temporarily intervene): ESMA may also intervene to restrict a particular financial instrument or activity on a temporary basis, provided that conditions (i) and (ii) above are met and no regulator has already intervened.
1. MiFID Article 51 (Systems resilience, circuit breakers and electronic trading): Regulated markets are subject to an overarching obligation to put in place systems in order to ensure resilient trading, sufficient capacity, orderly trading during conditions of market stress and business continuity. These systems should themselves be stress tested.
Regulated markets are also subject to a number of individual systems requirements aimed at ensuring orderly markets through: