In a draft report published on 20 March 2012, the European Committee on Economic and Monetary Affairs proposes a number of amendments to the Commission’s draft for a new European market abuse framework.
Following its review of the current European framework on market abuse, the European Commission adopted in October 2011 proposals (collectively: the “Proposals”) for a new regulation and for an amended directive on market abuse. The Proposals seek to address gaps in the current market abuse framework, as well as regulators’ inability to effectively enforce the applicable rules. To that end, the Proposals oblige Member States to treat severe cases of market abuse as criminal offences, subject to criminal sanctions in their national law.
In itsdraft report on the Proposals, the European Committee on Economic and Monetary Affairs proposes a number of amendments to the Proposals. Key amendments are:
(a) scope clarification;
(b) amendment of the definition of “inside information”;
(c) introduction of an obligation on the operators of trading venues to have in place rules to avoid abusive order entry;
(d) introduction of the concept of a "trading window", prohibiting managers from conducting any transactions on their own account during certain periods;
(e) removal of the €20,000 threshold for reporting of managers' transactions, resulting in all transactions carried out by managers needing to be reported;
(f) for high frequency trading (“HFT”): (i) creation of an advisory committee to investigate the link of HFT with the risk of market abuse and (ii) incorporation of the knowledge gained in the market manipulation definition; and
(g) strengthening of the provisions for the protection of whistleblowers.
Once the new rules have been negotiated and adopted at a European level, Member States will have two years to transpose the amended directive into national law. As for the regulation, it is expected to enter into force at an earlier point.