Activities of Jessica POLFJÄRD related to 2020/0267(COD)
Plenary speeches (1)
Pilot regime for market infrastructures based on distributed ledger technology (debate)
Shadow reports (1)
REPORT on the proposal for a regulation of the European Parliament and of the Council on a pilot regime for market infrastructures based on distributed ledger technology
Amendments (39)
Amendment 138 #
Proposal for a regulation
Recital 1
Recital 1
(1) The European Commission’s communication on a Digital Finance Strategy32 aims to ensure that the Union financial services legislation is fit for the digital age and contributes to a future- ready economy that works for the people, including by enabling the use of innovative technologies. The Union has a policy interest in exploring, developing and promoting the uptake of transformative technologies in the financial sector, such as blockchain and distributed ledger technology (‘DLT’). Crypto-assets are one of the main DLT applications for finance. _________________ 32Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee and the committee of the Regions on a Digital Finance Strategy for EU COM(2020)591
Amendment 140 #
Proposal for a regulation
Recital 2
Recital 2
(2) The majority of crypto-assets fall outside of the scope of EU legislation and raise, among others, challenges in terms of investor protection, market integrity and financial stability. They therefore require a dedicated regime at Union level. By contrast, other crypto-assets qualify as financial instruments within the meaning of Directive 2014/65/EU of the European Parliament and of the Council (Markets in Financial Instruments Directive, MiFID II)33 . In so far as a crypto-asset qualifies as a financial instrument under that Directive, a full set of Union financial rules, including Regulation (EU) 2017/1129 of the European Parliament and of the Council (the Prospectus Regulation)34 , Directive 2013/50/EU of the European Parliament and of the Council (the Transparency Directive)35 , Regulation (EU) No 596/2014 of the European Parliament and of the Council (the Market Abuse Regulation)36 , Regulation (EU) No 236/2012 of the European Parliament and of the Council (the Short Selling Regulation)37 , Regulation (EU) No 909/2014 of the European Parliament and of the Council (the Central Securities Depositories Regulation)38 and Directive 98/26/EC of the European Parliament and of the Council (the Settlement Finality Directive)39 may apply to its issuer and firms conducting activities related to it. The so-called tokenisation of financial instruments, that is to say their transformation into crypto-assets to enable them to be issued, stored and transferred on a distributed ledger, is expected to open up opportunities for efficiency improvements in the entire trading and post-trading area. _________________ 33Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349). 34Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (OJ L 168, 30.6.2017, p. 12) 35 Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013 amending Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and Commission Directive 2007/14/EC laying down detailed rules for the implementation of certain provisions of Directive 2004/109/EC (OJ L 294, 6.11.2013, p. 13) 36Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 12.6.2014, p. 1) 37Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (OJ L 86, 24.3.2012, p. 1). 38Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1) 39Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (OJ L 166, 11.6.1998, p. 45)
Amendment 149 #
Proposal for a regulation
Recital 4
Recital 4
(4) At the same time, regulatory gaps exist due to legal, technological and operational specificities related to the use of DLT and crypto-assets that qualify as financial instruments. For instance, there are no transparency, reliability and safety requirements imposed on the protocols and smart contracts underpinning crypto-assets that qualify as financial instruments. The underlying technology could also pose some novel forms of cyber risks that are not appropriately addressed by existing rules and practices. Several projects for the trading and post-trading of crypto-assets qualifying as financial instruments have been developed in the Union, but few are already in operation or they have limited scale. Given this limited experience as regards the trading and post-trading of transactions in crypto-assets that qualify as financial instruments, it would currently be premature to bring significant modifications to the Union financial services legislation to enable the full deployment of such crypto-assets and their underlying technology. At the same time, the creation of financial market infrastructures for crypto-assets that qualify as financial instruments is currently constrained by some requirements embedded in the Union’s financial services legislation that would not be fully adapted to crypto-assets qualifying as financial instruments and to the use of DLT. For instance, trading platforms for crypto- assets usually give direct access to retail investors, while traditional trading venues usually give access through financial intermediaries.
Amendment 155 #
Proposal for a regulation
Recital 5
Recital 5
(5) In order to allow for the development of crypto-assets that qualify as financial instruments and DLT, while preserving a high level of financial stability, market integrity, transparency and investor protection, it would be useful to create a pilot regime for DLT market infrastructures. A pilot regime for DLT market infrastructures should allow such DLT market infrastructures to be temporarily exempted from some specific requirements under the Union financial services legislation that could otherwise prevent them from developing solutions for the trading and settlement of transactions in crypto-assets that qualify as financial instruments. The pilot regime should also enable the European Securities and Markets Authorities (ESMA) and competent authorities to gain experience on the opportunities and specific risks crelated byto crypto-assets that qualify as financial instruments, and by their underlying technology. The experience gained with the pilot regime is intended to identify possible practical proposals for a suitable regulatory framework in order to make targeted adjustments to existing Union law regulating the issuance, safekeeping and asset servicing, trading and settlement of financial instruments based on DLT.
Amendment 167 #
(8) A DLT MTF should be a multilateral trading facility that is operated by an investment firm or a market operator that operates the business orf a regulated market and maybe the regulated market itself, authorised under Directive 2014/65/EU (Markets in Financial Instruments Directive, MiFID II), and that has received a specific permission under this Regulation. Such a DLT MTF should be subject to all the requirements applicable to a multilateral trading facility under the framework of Directive 2014/65/EU (Markets in Financial Instruments Directive, MiFID II), Regulation EU No 600/2014 of the European Parliament and of the Council (the Markets in Financial Instruments Regulation, MiFIR)41 , orand any other EUapplicable Union financial services legislation, except if it has been granted one or several exemptions by its national competent authority, in accordance with this Regulation and Directive (EU) .../... of the European Parliament and of the Council42 . _________________ 41Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (OJ L 173, 12.6.2014, p. 84) 42Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2009/65/EC, 2009/138/EU, 2011/61/EU, EU/2013/36, 2014/65/EU, (EU) 2015/2366 and EU/2016/2341 - COM(2020)596
Amendment 170 #
Proposal for a regulation
Recital 9
Recital 9
(9) The use of distributed ledger technology, with all transactions recorded in a decentralisistributed ledger, can expedite and condense trading and settlement to nearly real-time and could enable the merger of trading and post-trading activities. However, the current rules envisage the performance of trading and settlement activities by separate market infrastructures. Regulation (EU) No 909/2014 of the European Parliament and of the Council (the Central Securities Depositories Regulation) requires that financial instruments admitted to trading on a trading venue within the meaning of Directive 2014/65/EU (Market in Financial Instruments Directive, MiFID II) be recorded with a central securities depositary (‘CSD’), while a distributed ledger could be potentially used as a decentralised version of such a depository. Therefore, it would be justified to allow a DLT MTF to perform some activities normally performed by a CSD. Therefore, when granted the relevant exemption(s), a DLT MTF should be allowed to ensure the initial recording of DLT transferable securities, the settlement of transactions in DLT transferable securities and the safekeeping of DLT transferable securities.
Amendment 172 #
Proposal for a regulation
Recital 10
Recital 10
(10) A DLT securities settlement system should be a securities settlement system operated by a CSD authorised under Regulation (EU) No 909/2014 (the Central Securities Depositories Regulation) that has received a specific permission under this Regulation. A DLT securities settlement system, and the CSD operating it, should be subject to the relevant requirements of Regulation (EU) No 909/2014 (the Central Securities Depository Regulation), and any other applicable Union financial services legislation except where the national competent authority has granted the CSD operating the DLT securities settlement system with one or several exemptions, in accordance with this Regulation.
Amendment 178 #
Proposal for a regulation
Recital 11
Recital 11
(11) A DLT MTF or a CSD operating a DLT securities settlement system should only admit to trading or record DLT transferable securities on theira distributed ledger. DLT transferable securities should be crypto-assets that qualify as ‘transferable securities’ within the meaning of Directive 2014/65/EU (the Market in Financial Instruments Directive, MiFID II) and that are issued, transferred and stored on a distributed ledger.
Amendment 182 #
Proposal for a regulation
Recital 12
Recital 12
(12) In order to allow innovation and experimentation in a sound regulatory environment while preserving financial stability, the type of transferable securities admitted to trading on a DLT MTF or recorded in a CSD operating a DLT securities settlement system should be limited to securities, such as shares and bonds that are not liquid, subject to value thresholds set out in this Regulation. In order to determine whether a share or bond is liquid or not, this Regulation should set some value thresholds. To avoid the creation of any risk to financial stability, the total market value of DLT transferable securities recorded by a CSD operating a DLT securities settlement system, or admitted to trading by a DLT MTF, should also be limited. DLT market infrastructures should also be prevented from admitting to trading or recording on the distributed ledger sovereign bonds. To verify that the DLT transferable securities traded on or recorded by a DLT market infrastructure meets the conditions imposed under this Regulation, national competent authorities should be allowed to require such DLT market infrastructures to submit reports.
Amendment 184 #
Proposal for a regulation
Recital 13
Recital 13
(13) In order to ensure a level playing field with transferable securities admitted to trading on a traditional trading venue within the meaning of Directive 2014/65/EU (the Market in Financial Instruments Directive, MiFID II) and ato ensure high levels of market integrity, investor protection and financial stability, the DLT transferable securities admitted to trading on a DLT MTF should always be subject to the provisions prohibiting market abuse in Regulation (EU) No 596/2014 (the Market Abuse Regulation).
Amendment 190 #
Proposal for a regulation
Recital 15
Recital 15
(15) Where a financial instrument is admitted to trading on an MTF, it is to be recorded with an authorised Central Securities Depository in accordance with Regulation (EU) No 909/2014 (the Central Securities Depository Regulation). While the recording of a transferable security and the settlement of related transactions could potentially take place on a distributed ledger, Regulation (EU) No 909/2014 imposes an intermediation by a CSD and would oblige to replicate the recording on the distributed ledger at the CSD level, potentially imposing a functionally redundant overlay to the trade lifecycle of a financial instrument handled by DLT market infrastructures subject to this Regulation. Therefore, a DLT MTF should be able to request an exemption of the book-entry requirement and the recording with a CSD set by Regulation (EU) No 909/2014, where the DLT MTF complies with equivalent requirements to those applying to a CSD. The DLT MTF should record the transferable securities on itsa distributed ledger, ensure the integrity of the issues on the distributed ledger, establish and maintain procedures to ensure the safekeeping of the DLT transferable securities, complete the settlement of transactions, and prevent settlement fails.
Amendment 197 #
Proposal for a regulation
Recital 20
Recital 20
(20) A CSD operating a securities settlement system should be allowed to request exemptions from differentcertain provisions that are likely to create regulatory obstacles for the development of settlement securities systems for transferable securities. For instance, a CSD should be able to request an exemption from some definitions of Regulation (EU) 909/2014 (the Central Securities Depositories Regulation), such as the notion of ‘dematerialised form’, ‘security account’, ‘transfer orders’ as well as exemptions from provisions which refers to the notion of ‘security account’, such as the rules on the recording of securities, integrity of issue or segregation of accounts. CSDs operate securities settlement system by crediting and debiting the securities accounts of its participants. However, double-entry (or multiple-entry) book keepings securities accounts may not always exist in a DLT system. Therefore, a CSD operating a DLT securities settlements system should be able to request an exemption from the rules referring to the notion of ‘securities account’ or ‘book-entry form’ should it be necessary to allow the recording of DLT transferable securities on a distributed ledger, to ensure the integrity of the DLT transferable security issue on the distributed ledger and the segregation of the DLT transferable securities belonging to various participants.
Amendment 200 #
Proposal for a regulation
Recital 21
Recital 21
(21) Under Regulation (EU) No 909/2014 (the Central Securities Depositories Regulation), a CSD can only outsource one of its core activities, after receiving an authorisation from the competent authority. The CSD is also required to respect several conditions, so that the outsourcing does not result in a delegation of its responsibility or in a modification of the obligations of the CSD towards its participants or issuers. Depending on its business plan, a CSD operating a DLT securities settlement system could be willing to share the responsibility of runnoperating itsthe distributed ledger on which the transferable securities are recorded with other entities, including with its participants. The DLT securities settlement system should be able to request an exemption from the outsourcing requirements to develop such innovative business models. In such a case, they should demonstrate that the provisions on outsourcing are incompatible with the use of DLT as envisaged in their business plan and they should also demonstrate that some minimum requirements on outsourcing are met.
Amendment 208 #
Proposal for a regulation
Recital 27
Recital 27
(27) DLT market infrastructures should also be subject to additional requirements, compared to traditional market infrastructures. These requirements are necessary to avoid risks raiselated byto the use of DLT or by the new way the DLT market infrastructure would carry out its activities. Therefore, DLT market infrastructure should establish a clear business plan that details how the DLT would be used and the legal arrangements put in place.
Amendment 211 #
Proposal for a regulation
Recital 28
Recital 28
(28) A CSD operating a DLT securities settlement system, or DLT MTF where they are permitted to settle the transactions in DLT transferable securities themselves, should establish or document, as appropriate, the rules on the functioning of the proprietary DLT they operatuse, including the rules to access and admission on the DLT, the rules for the participating nodes and the rules to address potential conflicts of interest, as well as risk management measures.
Amendment 225 #
Proposal for a regulation
Recital 33 a (new)
Recital 33 a (new)
(33 a) Access to the pilot regime should not be limited to incumbents, but instead should be open to new entrants. Thus, where an entity that is not authorised under MIFID II or under the Central Securities Depositories Regulation applies for an authorisation under those legal acts and, at the same time, applies for a specific permission under this Regulation, the competent authority should, in assessing the application for authorisation under MIFID II or under the Central Securities Depositories Regulation, only verify compliance with requirements in respect of which an exemption has not been requested and granted under the pilot regime. In such cases, authorisation under MIFID II or under the Central Securities Depositories Regulation should be given only for the purpose of operating a DLT market infrastructure under this Regulation.
Amendment 238 #
Proposal for a regulation
Recital 40 a (new)
Recital 40 a (new)
(40 a) ESMA should publish annual reports in order to provide market participants with a better understanding of the functioning and development of the markets and to provide clarification on the application of the pilot regime. The reports should also include an update on the progress of the pilot regime regarding trends and emerging risks and be submitted to the European Parliament, the Council and the Commission.
Amendment 243 #
Proposal for a regulation
Article 1 – paragraph 1
Article 1 – paragraph 1
(1) This Regulation lays down requirements on multilateral trading facilities and securities settlement systems using distributed ledger technology ‘DLT market infrastructures’, which are granted with a specific permissions to operate in accordance with Article 7 and Article 8.
Amendment 246 #
Proposal for a regulation
Article 1 – paragraph 2 – point f
Article 1 – paragraph 2 – point f
(f) cooperation between operators of DLT market infrastructures, national competent authorities and ESMA.
Amendment 257 #
Proposal for a regulation
Article 2 – paragraph 1 – point 5 a (new)
Article 2 – paragraph 1 – point 5 a (new)
(5 a) ‘DLT exchange-traded fund units’ or ‘DLT ETF units’ means units or shares of an exchange-traded fund within the meaning of Article 4(1)(46) of Directive 2014/65/EU that are issued, recorded, transferred and stored using DLT;
Amendment 272 #
Proposal for a regulation
Article 3 – paragraph 1 – point a
Article 3 – paragraph 1 – point a
(a) shares, the issuer of which has a market capitalisation or a tentative market capitalisation of less than EUR 2500 million; or
Amendment 274 #
Proposal for a regulation
Article 3 – paragraph 1 – point b
Article 3 – paragraph 1 – point b
(b) convertible bonds, covered bonds, corporate bonds, sovereign bonds, other public bonds and other bonds, with an issuance size of less than EUR 500 million.
Amendment 279 #
Proposal for a regulation
Article 3 – paragraph 1 – point b a (new)
Article 3 – paragraph 1 – point b a (new)
(b a) DLT ETF units, investing in the types of instruments referred to in points (a) and (b).
Amendment 283 #
Proposal for a regulation
Article 3 – paragraph 2
Article 3 – paragraph 2
Amendment 301 #
1. A DLT MTF shall be subject to all the requirements applicable to an MTF under Directive 2014/65/EU and, Regulation (EU) No 2014/600, and any other applicable Union financial services legislation except if the investment firm or the market operator operating the DLT MTF:
Amendment 308 #
Proposal for a regulation
Article 4 – paragraph 2 – introductory part
Article 4 – paragraph 2 – introductory part
2. At its request, an investment firm or a market operator operating a DLT MTF may be permitted to admit to trading DLT transferable securities that are not recorded in a CSD in accordance with Article 3(2) of Regulation (EU) 909/2014 but instead recorded on the DLT MTF’s distributed ledger used by the DLT MTF.
Amendment 312 #
Proposal for a regulation
Article 4 – paragraph 2 – subparagraph 2
Article 4 – paragraph 2 – subparagraph 2
Where no request for an exemption has been made by the DLT MTF in accordance with the first subparagraph, the DLT transferable securities shall either be recorded in book-entry form in a CSD or on thea distributed ledger technology ofused by a CSD operating a DLT securities settlement system.
Amendment 331 #
Proposal for a regulation
Article 5 – paragraph 1 – introductory part
Article 5 – paragraph 1 – introductory part
1. A CSD operating a DLT securities settlement system shall be subject to the requirements applicable to a CSD under Regulation (EU) No 909/2014 and any other applicable Union financial services legislation, except if such a CSD:
Amendment 336 #
Proposal for a regulation
Article 5 – paragraph 2 – point a
Article 5 – paragraph 2 – point a
(a) demonstrates that the use of a ‘securities account’ as defined under Article 2(28) of Regulation (EU) No 909/2014 or the use of book-entry form are incompatible with the use of its particular DLT used by the CSD concerned;
Amendment 355 #
Proposal for a regulation
Article 5 – paragraph 5 – subparagraph 2
Article 5 – paragraph 5 – subparagraph 2
Where settlement occurs through commercial bank money or e-money tokens, the investment firm or market operator operating the DLT MTFCSD operating the DLT securities settlement system shall identify, measure, monitor, manage, and minimise any counterparty risk arising from the use of such money.
Amendment 363 #
Proposal for a regulation
Article 5 – paragraph 7 – subparagraph 1 – point a
Article 5 – paragraph 7 – subparagraph 1 – point a
(a) the exemption requested is proportionate to and justified by the use of its DLTthe particular DLT used by the CSD concerned, and;
Amendment 379 #
Proposal for a regulation
Article 6 – paragraph 2
Article 6 – paragraph 2
2. A CSD operating a DLT securities settlement system, and an investment firm or a market operator operating a DLT MTF requesting an exemption from Article 3(2) of Regulation (EU) No 909/2014, shall establish or document, as appropriate, rules on the functioning of the DLT they operate, including the rules for accessing the distributed ledger technology, the participation of the validating nodes, addressing potential conflicts of interest, and risk management including any mitigation measures.
Amendment 395 #
Proposal for a regulation
Article 7 – paragraph 1 a (new)
Article 7 – paragraph 1 a (new)
1 a. Where a legal person applies for authorisation of a market operator or an investment firm under Directive 2014/65/EU and, at the same time, applies for a specific permission under this Article, with the sole purpose of operating a DLT MTF, the competent authority shall not assess compliance with the requirements of Directive 2014/65/EU in respect of which the applicant has requested and been granted an exemption pursuant to Article 4 of this Regulation.
Amendment 397 #
Proposal for a regulation
Article 7 – paragraph 2 – point c
Article 7 – paragraph 2 – point c
(c) where applicable, the functioning of its proprietarythe DLT as referred to in Article 6(2);
Amendment 424 #
Proposal for a regulation
Article 8 – paragraph 1 a (new)
Article 8 – paragraph 1 a (new)
1 a. Where a legal person applies for an authorisation of a CSD under Regulation (EU) No 909/2014 and, at the same time, applies for a specific permission under this Article, with the sole purpose of operating a DLT securities settlement system, the competent authority shall not assess compliance with the requirements of Regulation (EU) No 909/2014 in respect of which the applicant has requested and been granted an exemption pursuant to Article 5 of this Regulation.
Amendment 426 #
Proposal for a regulation
Article 8 – paragraph 2 – point c
Article 8 – paragraph 2 – point c
(c) the functioning of its proprietarythe DLT as referred to in Article 6(2);
Amendment 434 #
Proposal for a regulation
Article 8 – paragraph 3 – introductory part
Article 8 – paragraph 3 – introductory part
3. Before deciding on an application for a specific permission to operate a DLT MTFsecurities settlement system under this Regulation, the competent authority shall notify and provide all relevant information on the DLT securities settlement system to ESMA and an explanation of the exemptions requested, their justification and any compensatory measures proposed by the applicant or required by the competent authority.
Amendment 493 #
Proposal for a regulation
Article 10 – paragraph 2 – point d
Article 10 – paragraph 2 – point d
(d) made permanent with or without amendmentby appropriate modifications to the Union framework on financial services legislation; or
Amendment 497 #
Proposal for a regulation
Article 10 a (new)
Article 10 a (new)
Article 10 a Interim reports ESMA shall publish annual interim reports in order to provide market participants with information on the functioning of the markets, to address incorrect behaviour of operators, to provide clarifications on the application of this Regulation and to update previous indications based on the evolution of DLT. Those reports shall also provide an overall description of the pilot regime focusing on trends and emerging risks and shall be submitted to the European Parliament, the Council and the Commission. The first such report shall be published... [12 months after the date of entry into application of this Regulation].