EU Regulation now applicable
As of 23 March 2023, Regulation (EU) 2022/858 on a pilot regime for market infrastructures based on distributed ledger technology (the “DLT Pilot Regime Regulation”) is applicable (noting that certain provisions thereof were applicable from an earlier date). The DLT Pilot Regime Regulation aims to support the development of crypto-assets that qualify as financial instruments and for the development of DLT more generally, while still preserving a high level of investor protection and market integrity.
New Luxembourg Law
On 20 March 2022, Luxembourg law No. 8055 on distributed ledger technology (the "DLT Law") which transposes the DLT Pilot Regime Regulation into national legislation was published in the Luxembourg Official Gazette. The DLT Law amends (i) the law of 5 April 1993 on the financial sector (the "Financial Sector Law"), (ii) the law of 5 August 2005 on financial collateral law (the "Financial Collateral Law") and (iii) the law on 30 May 2018 on markets in financial instruments (the "Markets in Financial Instruments Law").
In an article published on 6 October 2022, we summarised the highlights of the DLT Law, which was in draft form at the time. For an overview of the amendments introduced by the DLT Law, we refer you to our previous newsletter article on the topic.
The DLT law is fully in effect since 23 March 2023.
Updated ESMA Q&A
On 3 February 2023, ESMA updated its questions and answers on the implementation of Regulation (EU) 2022/858 of 30 May 2022 on a pilot regime for market infrastructures based on distributed ledger technology ("DLT") (the “DLT Pilot Regime Q&A”) with the addition of four new questions and answers.
In the area of transaction reporting, ESMA has clarified how a DLT multilateral trading facility ("DLT MTF") / a DLT trading and settlement system ("DLT TSS") should report on behalf of natural persons that are not subject to Article 26 Markets in Financial Instruments Regulation (“MiFIR”). Pursuant to Article 26 MiFIR trading venues shall report on behalf of those firms that are not subject to the transaction reporting regime.
On the topic of financial instruments reference data, ESMA clarified how "issuer or operator of the trading venue identifier" data that needs to be provided in accordance with RTS 23 should be populated for DLT financial instruments (i) that are digital representations of previously issued financial instruments and (ii) that are exclusively created on the DLT platform and do not represent a previously issued financial instrument. RTS 23 are contained within Commission Delegated Regulation (EU) 2017/585 of 14 July 2016 which supplements MiFIR with regulatory technical standards for the data standards and formats for financial instrument reference data and technical measures in relation to arrangements to be made by ESMA and competent authorities.
Finally, on transparency, ESMA confirmed, for complying with post-trade transparency obligations under the RTS 1 and RTS 2, which identification codes should be provided by trading venues, investment firms and approved publication arrangements for DLT instruments in the relevant reporting fields. RTS 1 are contained within Commission Delegated Regulation (EU) 2017/587 of 14 July 2016 which supplements MiFIR with regulatory technical standards on transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internaliser. RTS 2 are set out in Commission Delegated Regulation (EU) 2017/583 of 14 July 2016 which supplements MiFIR with regulatory technical standards on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives.
Please note that, for ease of reference, RTS have been numbered in this document in accordance with the numbering used in the package sent by ESMA to the Commission in September 2015 (ESMA/2015/1464). Readers are nevertheless invited to consult the Commission and European Parliament websites for updated versions of those RTS.
New ESMA Guidelines on Permissions to Operate DLT Market Infrastructures
On 8 March 2023, ESMA published guidelines on standard forms, formats and templates to apply for permission to operate a DLT market infrastructure (the “Guidelines”). The Guidelines were published in order to establish consistent, efficient and effective supervisory practices regarding the information to be provided for applications to obtain permissions to operate DLT market infrastructures from the relevant competent authorities.
The Guidelines set forth the information that must be provided by all applicants seeking specific permission to operate a DLT market infrastructure (including a DLT MTF, a DLT settlement system and a DLT TSS). They also elaborate on the further information which must be provided by the relevant applicant depending on its regulatory status and on the nature if its application request.
The Guidelines apply as from 23 March 2023.