The European securities markets are highly regulated. However, it is worthy if you can deep dive and learn more details on how they are regulated. This will assist you to make informed decisions as you continue with your investments on the European securities markets.
Regulation of European securities markets under European securities legislation
The European securities markets are regulated under European Securities Legislation. This is not just providing protection to the European based investment service providers and the European based securities issuers. The legislation is also capable of delivering protection to the issuers who are based out of Europe but are engaged with raising capital within Europe via retail or institutional offerings. On top of that, the European securities legislation is offering coverage for the issuers who have signed up with the European MTN programs. Moreover, we can see how the issuers who have been able to get themselves listed under the European Exchange are capable of receiving the coverage that they deserve as well. They include the Irish Stock Exchange, London Stock Exchange, and the Luxembourg Stock Exchange.
Understanding the framework for European securities legislation
ICMA Group says to know how the European securities market is regulated, you should have a solid understanding about the framework that is being used for the European securities legislation. This is where you should pay your attention to the Financial Services Action Plan that was implemented by the European Union. This was drafted with the objective of creating a single capital market within Europe. As a result, the issuers will be able to effectively access the capital market and proceed with their trading activities. It would also provide enhanced supervision within the European financial services as well.
On top of that, we can see how the Capital Markets Union Action Plan was implemented back in the year 2015. The main objective for this was to develop a legitimate and centralized market within the European Economic Area, which can also provide much-needed assistance for the people who go ahead with cross-border transactions.
Key components of the European Securities Legislation
The European Securities Legislation is made out of numerous components. You will be able to find their information listed under the Financial Services Action Plan. This would provide instantaneous legislative provisions with related to the securities market. The key components that you can find within the European Securities Legislation include the Transparency Directive, Market Abuse Regulation, Markets in Financial Instruments Directive, and Markets in Financial Instruments Regulation.
Along with these, you should understand the other European regulations that are associated with the securities offerings as well. It is true that not just the legislation is focuses on the securities. The insurance-based investment products as well as packaged retail products are also covered under this regulation. This new rule came into effect on 3rd of January, back in 2018. It is applicable to certain securities issues. This indicates the fact that the return that you can get out of the investment would fluctuate due to the indirect exposure to the underlying reference value or the assets.
Understanding financial instruments in the context
Financial instruments are made out of the securities, and they can be negotiated within the capital markets. The units that are in money market instruments and collective investment undertakings will be able covered under here. On top of that, the forward interest rate agreements, financial futures contracts, equity and currency swaps, interest rate, and the options to dispose or acquire foregoing are considered as financial instruments as well. All these instruments are properly regulated under the European securities markets to make sure that people who work along with them are in a position to get the maximum returns that are coming on their way.
Understanding insider dealing
Insider dealing is something that is prohibited according to the European securities markets. This is referred to the situations where people deal or even attempt to deal on the financial instruments while using the information that they get from inside. In other words, they will be taking maximum advantage out of insider information that they have been able to acquire from their contacts, where the information is not available for the public. On the other hand, it refers to inducing or recommending any other person to do things above as well. Moreover, it refers to disclosing inside information instead of the normal exercise of the employment, duties, or profession of such a person.
Understanding market sounding
When you are learning more about the way how European securities markets is regulated, you should have a solid picture in mind about the concept called market sounding. Market sounding is the process where the communication of information would happen. This communication would usually happen before a transaction is announced. This is done with the objective of capturing the attention of potential investors on a specific transaction, as well as the conditions associated with it. It can be pricing or size.
The market sounding process is usually conducted by one of the issuers. However, it can even be a secondary offeror associated with a financial instrument as well. During the market sounding process, the value or quantity associated with the transaction is disclosed. Along with that, it is also possible to get more information about the selling method based on the potential interest from the investors. On the other hand, it would include third party acting based on the interests of the people as well.
There are some conditions associated with market sounding as well. For example, there should be a statement of communication, which indicates the overall purpose of market sounding. On the other hand, there should be written procedures that explain the market sounding process as well.
These are some of the ways on how European securities markets are regulated. Likewise, the European securities markets are regulated from different directions, so that it can ensure the betterment of all the people who interact with it.