European Union : SMSG End of Term Report 2018

ESMA Securities and Markets Stakeholder Group

SMSG - End of Term Report 2018

Securities and Markets Stakeholder Group

ESMA22-16-1603

Foreword

The Securities and Markets Stakeholder Group (here called the SMSG or the Group) was first established in April 2011 under ESMA's founding Regulation to help facilitate consultation with stakeholders in all areas relevant to ESMA's tasks.

The third mandate of the SMSG was launched in July 2016 and comes to an end in December 2018. This report summarises the work and key achievements of the Group during this time. Dur-ing the current mandate period, the Group produced 21 papers in the form of public opinions, statements, advice and own initiative reports. More details on these papers are included herewith and the papers are also available on the SMSG section of the ESMA website.

The End of Term Report assesses the Group's current composition and functioning and makes a number of recommendations. We also consider our role in advising ESMA as well as the impact of our work. The report concludes with a number of considerations for the future tasks of ESMA and the cooperation of the Stakeholder Groups established to provide advice to the ESAs.

We drafted the third End of Term Report in the spirit of our mandate i.e. to help facilitate consul-tation with stakeholders in areas relevant to the tasks of the Authority. We hope to have contributed in the most effective way in assisting ESMA in the further improvement of the regulation and the supervision of European financial markets.

Paris, 31 December 2018

Rüdiger Veil	Christiane Hölz	Jarkko Syyrila
(Chair)	(Vice Chair)	(Vice Chair)

ESMA SMSG • CS 60747 - 103 rue de Grenelle • 753 45 Paris Cedex 07 • France • Tel. [phone] •www.esma.europa.eu/smsg

Table of Contents

PART I. The Role of the SMSG _________________________________________________________ 4

• 1. The legislative mandate_____________________________________________________4

• 2. Developments of ESMA's Work and the Advisory Role of the SMSG__________________4

PART II. THE COMPOSITION OF THE SMSG ______________________________________________ 5

• 1. Membership______________________________________________________________5

• 2. Steering Committee________________________________________________________6

PART III. Working Methods ____________________________________________________________ 7

• 1. Rules of Procedure ________________________________________________________7

• 2. Meetings ________________________________________________________________7

• 3. Secretariat and administrative support _________________________________________8

• 4. Relationship with ESMA, ESMA's CWGs and cooperation with other Stakeholder

Groups/user groups in the financial services area __________________________________8

PART IV. SMSG SELF-ASSESSMENT AND KEY MESSAGES _______________________________ 10

• 1. Survey _________________________________________________________________10

• 2. Key messages___________________________________________________________10

PART V. ACTIVITY REPORT __________________________________________________________ 12

• 1. SMSG Advice Papers, Statements and Letters ____________________________12

• 2. SMSG Permanent Working Group on MiFID II/MiFIR Implementation___________13

• 3. SMSG Presentations on Recent Market Developments and Supervisory

Convergence ______________________________________________________________14

Annex I - Members and categories _____________________________________________________ 15

Annex II- Rules of Procedure _________________________________________________________ 17

Executive summary

This report marks the end of term of the third mandate period of the Securities and Markets Stake-holder Group (SMSG). It covers the period from 1 July 2016 to 31 December 2018. The SMSG wishes to share its experiences with the public with a view to enhance the functioning of the SMSG as well as the overall European System of Financial Supervision of which it is a part. The report covers five areas: (i) the role of the SMSG, (ii) the composition of the SMSG, (iii) how the Group works, (iv) the lessons the SMSG has drawn from its work and (v) an overview of the papers adopted by the SMSG in this mandate period.

PART I. The Role of the SMSG

1. The legislative mandate

The ESMA Regulation requires establishing the Securities and Markets Stakeholder Group (SMSG) to help facilitate consultation with stakeholders in areas relevant to the tasks of ESMA. The tasks of ESMA are laid down in the ESMA Regulation. The main objective is to protect the public interest by contributing to the short, medium and long-term stability and effectiveness of the financial system, for the Union economy, its citizens and businesses. In particular, ESMA shall contribute to improving the functioning of the internal market and enhancing consumer and inves-tor protection. This field of tasks and activities determines the work of the SMSG. The SMSG shall be consulted on actions taken concerning regulatory technical standards and implementing tech-nical standards and, to the extent that these do not concern individual financial market participants, concerning guidelines and recommendations. The SMSG may submit opinions and advice to ESMA on any issue related to the tasks of ESMA. Furthermore, the SMSG may request investi-gations from ESMA into alleged breaches or non-application of Union law.

2. Developments of ESMA's Work and the Advisory Role of the SMSG

In its first years, ESMA has mainly aimed at strengthening regulation and creating a level-playing field (so-called single rulebook work). By the end of 2016, ESMA had delivered most of the key elements required for the single rulebook, in particular on the MiFID II- and MAR-regime. ESMA has since then focused more and more on supervisory convergence. In addition, new challenges have arisen, such as the UK's decision to leave the EU and the further digitalisation of financial markets.

These developments have also impacted the work of the SMSG. It considers as one of its main tasks to provide a high level advice to ESMA on the preparation of standards, proposals of dele-gated acts and the issuance of guidelines/recommendation. Insofar, the SMSG responded to nine consultations from ESMA in the last 2.5 years. In addition, the SMSG contributed to ESMA's work by dealing with matters that were deemed important by its members due to developments in Eu-ropean financial markets. This "own initiative work" has become another important strategic focus of the SMSG in this mandate period. The SMSG appreciates the opportunity to discuss itsworkstreams with ESMA's Chair and ESMA's Executive Director and to regularly exchange views on its advice papers and opinions with ESMA's Board of Supervisors.

The issues dealt with by own initiative advice papers in this mandate period include (i) securities lending, (ii) product intervention under MiFIR, (iii) access to public capital markets for SMEs, (iv) cost and past performance of the main categories of retail investment, insurance and pension products, (v) sustainable finance and (vi) initial coin offerings and crypto assets. In addition, the SMSG contributed to the political discussion about the review of the operations of the European Supervisory Authorities, by providing advice to ESMA and by sharing its position with the Euro-pean Commission, various members of the European Parliament and the Council. The SMSG has welcomed the European Commission's initiative to reform the operation of the ESAs. In particular, the SMSG has brought to the attention of the co-legislators that there is much more that can be done to foster convergence among national authorities. There is also a need to reinforce consumer and investor protection in the EU, and ESMA should play an important role in this regard. It is therefore key to strengthen ESMA's powers.

Moreover, the SMSG discussed towards the end of its term two issues with strategic implications for European securities markets. The first issue was the question whether the current decentral-ized structure of supervision on securities markets in which national authorities play a predominant role is still optimal. Similar to banking where the ECB has become the direct supervisor for banks, one may study the question whether the EU should move towards a European authority exerting direct supervision on securities markets. The second issue was the question to what extent dis-ruptions (for instance related to climate change and new technologies) are likely to have a signifi-cant impact on the value of securities traded on European financial markets in the near future. This may have important consequences for investors.

SMSG members noted that the approaching end of the current mandate would not allow sufficient time for working groups to achieve significant progress on the two strategic issues highlighted above. A future SMSG may want to consider this matter again.

PART II. THE COMPOSITION OF THE SMSG

1. Membership

The ESMA Regulation requires that the SMSG shall be composed of 30 members, representing in balanced proportions financial market participants operating in the Union, their employees' rep- resentatives as well as consumers, users of financial services and representatives of SMEs. At least five of its members shall be independent top-ranking academics. Ten of its members shall represent financial market participants. The members of the SMSG shall be appointed by the Board of Supervisors, following proposals from the relevant stakeholders. In making its decision, the Board of Supervisors shall, to the extent possible, ensure an appropriate geographical and gender balance and representation of stakeholders across the Union.