In the space of seven weeks, the European Securities and Markets Authority (ESMA) and national competent authorities (NCAs) have taken a number of initiatives to try to address some of the effects of the COVID-19 pandemic on financial services firms and issuers.

The following blog provides a summary of ESMA’s measures, together with the FCA’s position where relevant [1]. Overall, the steps taken suggest that regulatory interest is likely to intensify around conduct and investor and market protection, whereas at the same time some flexibility is being offered when it comes to meeting certain regulatory deadlines – whether for implementing new requirements, submitting reports, or responding to consultations. In brief, ESMA is signalling that securities and markets supervisors are keen to ease operational risks and burdens where it is prudent to do so, while upholding the expected standards.

We have grouped the various measures into several broad categories, covering initiatives concerning MiFID II, the SFTR, fund management and corporate disclosure, among others.


Investor protection/conduct

▪ Call taping: ESMA clarified that in the exceptional circumstances created by COVID-19, there might be situations where the recording of conversations under MiFID II may not be practicable. In such scenarios, ESMA expects firms to consider what alternative steps they could take to mitigate the risks. It suggests for example, using written minutes or notes of telephone conversations when providing services to clients and informing them that this is taking place. Firms should also ensure enhanced monitoring and retrospective review of relevant orders and transactions. In general, firms are expected to deploy all possible efforts to ensure that the above measures remain temporary and that recording of telephone conversations is restored as soon as possible.

Similarly, FCA guidance sets out that firms should continue to record calls, but if they are unable to, they should notify the FCA and take steps to mitigate outstanding risks, such as enhanced monitoring or retrospective review once the situation has been resolved. Firms should also continue to take all steps to prevent market abuse risks, and the FCA will continue to monitor the market and take action if necessary.

▪ Best execution: ESMA recommended that NCAs consider the possibility that (i) execution venues unable to publish RTS 27 reports due by 31 March 2020 may only be able to publish them as soon as reasonably practicable after that date and no later than by the following reporting deadline (i.e. 30 June 2020); and (ii) firms may only be able to publish the RTS 28 reports due by 30 April 2020 on or before 30 June 2020. ESMA encouraged NCAs not to prioritise supervisory actions in this respect and to apply a proportionate risk-based approach in enforcing these deadlines. The FCA confirmed it is taking this approach.


▪ Tick-size regime for systematic internalisers (SIs): ESMA expects NCAs not to prioritise their supervisory actions in relation to the new tick-size regime for SIs under MiFIR and IFR from 26 March, the application date, until 26 June 2020. The FCA confirmed it will follow this recommendation.

▪ Non-equity calculations & SI data: ESMA postponed the publication dates for annual non-equity transparency calculations and quarterly SI data for non-equity instruments other than bonds. ESMA took the view that compliance with these obligations, triggered under MiFID II by the first publication of the data, originally scheduled for 30 April and 1 May 2020, could create unintended operational risks for market participants as it would require significant technological changes. Therefore:

  • publication of transparency calculations is postponed to 15 July and their application to 15 September. In the meantime the transitional transparency calculations will continue to apply;
  • data for the performance of the SI test for derivatives, ETCs, ETNs, emission allowances and structured finance products will be published by 1 August. The mandatory SI regime will apply from 15 September; and
  • publication and application of the annual transparency calculations for bonds remain unchanged.

▪ Equity calculations: In contrast, ESMA announced that the date of application of the transparency calculations for equity instruments would continue to be 1 April 2020. This is based on the rationale that adapting to new transparency results for equity is a process that firms have already performed several times and should not require new technologies. Delaying the application of the new calculations however could in itself entail some risks and create additional operational burdens to other market participants.

▪ Consultation extension: ESMA extended further the response date for the consultation on the MiFID II/MiFIR review report on the transparency regime for non-equity instruments and the trading obligation for derivatives to 14 June. The consultation had already been extended by four weeks.


▪ Implementation: The reporting start date in respect of Securities Financing Transactions (SFTs) for credit institutions and investment firms has effectively been postponed from 13 April until 13 July 2020, and ESMA expects NCAs not to prioritise their supervisory actions in this respect. ESMA later clarified that this applies to SFTs concluded between 13 April and 13 July 2020 and SFTs subject to backloading. The FCA supported this statement and follows the approach. As for trade repositories (TRs), ESMA expects them to be registered sufficiently ahead of 13 July 2020.

In the UK, HMT has just announced it will bring forward legislation to allow TRs who wish to offer services under the UK SFTR to register with the FCA, or apply in advance, and operate in the UK immediately after the end of the transition period. Further details will be provided by the FCA in due course.

Fund Management 

▪ Periodic reporting: ESMA published a statement directed at fund managers, specifically, UCITS management companies, self-managed UCITS investment companies, authorised AIFMs, non-EU AIFMs marketing AIFs, EuVECA managers, and EuSEF managers, encouraging NCAs to adopt a proportionate risk-based approach and, when possible, not to prioritise supervisory actions against these market participants in respect of the upcoming reporting deadlines.

The FCA is taking a similar approach and also has given firms extra time to produce their annual and half-yearly reports and accounts because of the impact of COVID-19. The FCA is giving firms an extra month for half-yearly reports, and an extra two for annual reports. For more on FCA measures taken specifically in relation to investment management please see our blog here.

Short selling 

▪ Lower reporting threshold for short positions: ESMA now temporarily requires the holders of net short positions in shares traded on EU regulated markets to report positions of 0.1% and above. This took immediate effect on 16 March 2020, but it excludes situations where the principal venue for the trading of the shares is located in a third country, or is related to market making or stabilisation activities.

▪ Approval of short selling bans by NCAs: ESMA approved bans in Austria (FMA), Belgium (FSMA), France (AMF), Greece (HCMC), Italy (CONSOB) and Spain (CNMV). All measures were initially for a month, except for Italy (initially three months). The five countries other than Italy subsequently extended the bans until 18 May, with the possibility of a further renewal.

The FCA has not introduced a ban as the relevant activity reported was low and there was no evidence that it had been the driver of recent market falls. It stated that the loss of the benefits of short selling would need to be balanced before determining that preventing short selling was appropriate, but confirmed that it would take all actions within its powers to safeguard orderly markets where necessary.

Corporate Disclosure 

▪ Accounting implications: ESMA guidance set out some accounting implications of the economic support and relief measures adopted by EU Member States in response to the outbreak which include moratoria on repayment of loans. It aims to guide issuers and auditors on the application of IFRS 9 Financial Instruments, specifically in relation to the calculation of expected credit losses and related disclosure requirements. ESMA’s approach is consistent with the EBA’s approach.

▪ Financial reporting deadlines: ESMA guidelines address the implications of the pandemic on the deadlines for publishing financial reports which apply to listed issuers under the Transparency Directive. ESMA recommended that NCAs apply forbearance towards issuers who need to delay publication of financial reports beyond the statutory deadline. The guidelines underline that issuers should keep their investors informed of the expected publication delay, and confirm that requirements under MAR still apply.

The FCA also proposed temporary relief for listed companies facing COVID-19 challenges around corporate reporting. The relief gives them an additional two months to publish their audited financial statements, on top of the standard four. Similarly, the FCA also reminded firms of the importance of keeping the market informed, and of their obligations concerning inside information. It stressed that companies should recognise “that the global pandemic and policy responses to it may alter the nature of [inside] information that is material to a business’s prospects”.

▪ Alternative Performance Measures (APMs): ESMA issued new Q&As on APMs in the context of COVID-19. They encourage issuers to use caution when adjusting existing APMs and including new APMs to address the impact of COVID-19. ESMA recommends that issuers provide narrative information regarding any modifications made, the assumptions used and the impact of COVID-19, as well as information on measures taken or expected to be taken to address the impact the outbreak may have on their operations and performance.

Benchmarks Regulation (BMR)

▪ External audit: ESMA issued a statement to promote coordinated action by NCAs regarding the timeliness of fulfilling external audit requirements for interest rate benchmark administrators and supervised contributors. ESMA expects NCAs not to prioritise supervisory actions relating to audit timeliness where the audits are carried out by 30 September 2020, and generally to apply a proportionate risk-based approach in enforcing the BMR in that respect.

▪ Consultation extension: ESMA extended its consultation response deadline in relation to the draft RTSs under the BMR (as mandated by the ESAs’ review) to 8 June.

[1] For measures taken by other European regulators please see here.