Reponses to the European Commission's (EC) public consultation on the Market Abuse Directive (MAD), the directive designed to harmonise the regulatory approach to market manipulation and insider dealing in Europe, are expected to be published before 10 August 2010.
The consultation is intended to review the directive in light of the gaps in legislation that have become apparent following its adoption and subsequent changes to market structure.
Concerns about the loopholes in supervision of markets were raised on 16 March by consultancy consortium Avenues, which noted that since the adoption of MiFID in November 2007, the European market had become cross-border, an occurrence not catered for by MAD.
The consultation opened on 28 June 2010 and closed on 23 July 2010. It has received over 85 responses.
The EC has proposed that MAD, which was adopted in 2003, should be extended to cover instruments that are traded on MTFs but are not traded on regular markets, for example certain energy derivatives.
It has also suggested expanding the directive to deal with market abuse through use of derivatives to affect the underlying, prohibition of attempts at market manipulation and the alignment of insider trading of commodity derivatives with that of other inside information legislation.
Industry association the Federation of European Securities Exchanges (FESE), which has already released its response, supported the unification of regulation across different jurisdictions. However, it was cautious about extending the scope of the current directive in ways that might burden smaller issuers and the venues that serve them with added costs and complexity. For example, FESE noted that the obligation to disclose inside information should not apply to issuers with instruments that only traded on an MTF.
The Commission has also proposed boosting enforcement through increased regulatory oversight and cooperation and ultimately by creating a single rulebook. That would remove implementation options that regulators currently have available which create a risk of regulatory arbitrage.
The EC has said it intends to release its final proposal on MAD by the end of 2010.