Brussels’ rules of etiquette

The on-going flood of new regulations and directives coming out of Brussels continues. With all its consultation papers, drafts, technical or implementing standards, recitals and articles, it is hard to keep your head above the waterline. Here are a few pointers to help you structure that paper flood into some more manageable channels.

European laws and legislations are formally referred to as acts. An act is a collective term for a regulation or a directive (it also includes a decision, a recommendation or an opinion, but let’s ignore that for the sake of simplicity). A Directive requires individual member states to pass a law to achieve a particular result, while a Regulation comes into effect immediately without member states’ actions.

The structure of all acts is as follows:

Title: short, concise and precise;
Citations: setting out the legal basis of the act and the main steps in the procedure leading to its adoption;
Recitals: setting out reasons for the act. Most importantly, they shall not contain political opinions or be prescriptive, rather they should use non-mandatory and descriptive language;
Articles: Finally, the actual act starts. An act comprises many different articles. Usually, Article 1 discusses the scope and Article 2 provides the definition of any relevant term used in the subsequent law.

The process to pass an act is rather lengthy, as the example of the MiFID review described in a previous blog illustrates. In general, the act can be referred to as Level 1 text. Following that, the Level 2 text digs into the details and provides more practical instructions. ESMA, the regulator for European financial markets, usually drafts these Level 2 texts. These drafts are called regulatory standards or technical standards. In order to draft the standards, ESMA initiates another round of market consultations, similar to the European Commission when they wrote the initial Level 1 text.

At the moment EMIR is at exactly this stage of the process. The Level 1 text has been agreed and ESMA has until 30th September 2012 to draft the technical standards. When ESMA has a final draft of the technical standards, it will submit this to the European Commission. The Commission may then decide to endorse the draft and to declare it a delegated act. That act then becomes legally binding. A good example of this can be seen with the recently finished European Short Selling Regulation and its four different implementing /delegated acts.

Leave A Comment

Copyright © 2018 Fidessa Group Holdings Limited. All rights reserved.

The information contained within this website is provided for informational purposes only. Fidessa will use reasonable care to ensure that information is accurate at the time it is made available, and for the duration that it remains on the site. The information may be changed by Fidessa at any time without notice. We also reserve the right to close the website at any time. No representation or warranty, expressed or implied, is given on behalf of Fidessa or any of its respective directors, employees, agents, or advisers as to the accuracy or completeness of the information or opinions contained herein or its suitability for any purpose and, save in the case of fraud, all liability for direct, indirect, special, consequential or other loss or damages of whatever kind that may arise from use of the website is hereby excluded to the fullest extent permitted by law. Any decisions you make based on the information in this website are your sole responsibility and information on the website should not be relied upon in connection with any investment decision.

The copyright of this website belongs to Fidessa. All other intellectual property rights are reserved.

Reproduction or redistribution of this information is prohibited except with written permission from Fidessa.