The European Commission has published a proposal for a regulation to replace the Market Abuse Directive. The new regulation is designed to strengthen supervisors' investigative and sanction levying powers, to help fight market abuse in the commodities and derivatives markets, and promote that regulation keeps up with market developments. The key changes are:
- The scope of the rules will be extended to financial instruments that are only traded on new platforms such as multilateral trading facilities and organised trading facilities, and also to over-the-counter trade.
- The proposal clarifies which high-frequency trading strategies (HFT) fall under the prohibition against market manipulation.
- The regulation extends the options of reporting suspect transactions to suspect non-executed orders and OTC transactions. Supervisors will have the power to require telephone or data traffic records from telecommunications operators or inspect private documents if there is a reasonable suspicion of insider dealing or market manipulation. Supervisors will also have the power to enter private buildings, provided that they have prior judicial authorisation.
- The regulation obliges the member states to offer protection to whistle-blowers and sets common rules to encourage reporting of market abuse.
- "Attempt at market manipulation" is introduced as a new criminal offence.
- The new rules also apply to trade in emission allowances.
Finally, the Commission has published a proposal for a directive obliging member states to provide for criminal sanctions for insider dealing and market manipulation. The directive contains definitions of insider dealing and market manipulation. When committed intentionally, both should be regarded as criminal conduct. The member states have to ensure that the criminal sanctions they impose are effective and proportionate and provide an adequate deterrent. In addition, criminal sanctions will have to be imposed for inciting, aiding and abetting market abuse or attempted market abuse.
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