Market Abuse Directive (MAD II)

Market Abuse Directive (MAD II)

What is Market Abuse Directive (MADII)?

The implementation of the Market Abuse Directive (MAD) in 2005 resulted in an EU-wide market abuse regime and a framework for establishing a proper flow of information to the market. It is designed to improve confidence in the integrity of the integrated European market and greater cross-border cooperation.

In October 2011 the EC issued a proposal for MAD II which aims to introduce common criminal sanctions of insider dealing/market manipulation and to align international interpretations of MAD into a harmonised approach.

When do you need to comply with MAD?

MAD I was implemented in the UK in July 2005. The proposals for MAD II and its accompanying regulation (MAR) are EU wide and are currently under discussion by the European Parliament, European Commission and European Union, which began 24th January 2013. Application of the new rules is not expected until 2015. The aim of the EC is to update MAD and MiFID together to ensure they are fully coherent and support each other.

Who will MAD affect?

MAD I affects all firms and individuals who participate in a regulated market. MAD II widens that scope to include financial instruments traded on MTFs, OTFs and OTC.

What are the key points of MAD?

MAD II proposals aim to strengthen the frameworks of MAD I to improve market integrity and efficiency as well as investor protection. MAD I is concerned with the following:

  • Inside information

  • Market manipulation

  • Disclosure of inside information

  • Insider’s lists

  • Disclosure of managers’ deals

  • Suspicious transaction reporting

  • Research disclosure

MAD II brings changes regarding:

  • An extension of the definitions of insider dealing and market manipulation and the scope of the market abuse framework to any financial instrument admitted to trading on MTF, OTF and OTC. Inside information definitions will be extended to include commodity derivatives. Market manipulation will be extended to cover cross market manipulation. For example, where derivative markets are used to effect spot markets.

  • An amended regime for SMEs with regards to their dealing obligations and disclosure. Inside information is required to be disclosed in a modified and more simple market-specific way. The proposal also clarifies managers’ transactions reporting requirements.

  • The introduction of an obligation for exchange of information and cooperation between financial and commodity regulators. The proposal includes suspicious transaction reporting to order and OTC transactions. Regulators and competent authorities will be granted access to a variety of private communications/documents where there is suspicion of insider dealing. The offence of Attempted Market Manipulation will also be introduced.

Related regulations

How can UnaVista help with MAD?

UnaVista can assist you in complying with a number of regulations, so you don’t have to build separate solutions for each problem. Future regulations can be catered for through the platform when required.

Utilise our Transaction Reporting experience

– We can leverage our knowledge of transaction reporting to meet the expanding disclosure obligations set out under the existing and reviewed Market Abuse Directive (MAD I & II).

Fulfil regulatory reconciliation requirements

– As a hosted central utility, UnaVista can help meet access requests from financial and commodity regulators if transaction reporting is being investigated by financial/commodity regulators.

Meet regulatory demands with access to external data feeds

- Report forms and templates by using the LSEG’s own data sources such as SEDOL Masterfile, FTSE and Regulatory News Service (RNS) to prevent cross-market manipulation accusations.