European Securities and Markets Authority (ESMA)

KEY POINTS

Consistent application of law

• ESMA draws up regulatory and technical standards based on EU financial legislation. It also has the power to issue guidelines and recommendations on the application of EU law.

Consumer protection and financial activities

• ESMA promotes transparency, simplicity and fairness in the markets to protect consumers of financial products. It monitors financial activities and analyses consumer trends, along with other tasks. Under certain strict conditions, it can temporarily prohibit or restrict financial activities that pose a threat to the stability of the markets.

Breach of law

• ESMA can investigate a breach of law by a national authority. This arises when the latter fails to ensure that a financial market participant complies with EU law.
• Within 2 months, ESMA can issue a recommendation requiring the national authority to take the necessary action to comply with EU law. Then, the European Commission may issue a formal opinion. If the national authority’s non-compliance persists, ESMA may directly address a decision to a financial market participant under certain strict conditions. This decision prevails over previous decisions taken by the national authority.

Amending Regulation (EU) 2019/2175

• This amending regulation grants ESMA direct supervisory powers over the administrators of critical benchmarks¹ and over providers of data communication services.
• It transfers authorisation and supervisory powers in relation to data reporting services providers² from competent authorities to ESMA, except for those benefiting from a derogation because they have limited EU relevance. This will reduce fragmentation and costs and ensure the same quality and reliability of data across the EU.
• ESMA gets a greater coordinating role in market abuse cases. Where certain orders, transactions or behaviours give rise to suspicions of market abuses and have cross-border implications for the integrity of financial markets or financial stability in the EU, ESMA is able to issue an opinion on the appropriate follow-up.
• The regulation grants ESMA, in addition to the competent authorities, competences to directly gather data from market participants in relation to pre- and post-trade transparency requirements and to authorise and oversee data reporting services providers.
• ESMA is able to conduct investigations and on-site inspections and can impose fines or periodic penalty payments to compel data reporting services providers to put an end to an infringement or to supply complete and correct information that it requires.
• As the competent authority for recognising non-EU-country benchmark administrators, ESMA is the EU counterpart for supervisors in non-EU countries, making cross-border cooperation more efficient and effective.