The European Securities and Markets Authority has published an opinion addressed to national regulators on points of convergence for Market Abuse Regulation-accepted market practices for liquidity contracts. MAR prohibits market manipulation - defined as entering into a transaction, placing an order to trade or engaging in behavior which gives, or is likely to give, a false or misleading signal as to the supply of, demand for, or price of, an instrument within the scope of MAR, or which secures, or is likely to secure, the price of such an instrument at an abnormal or artificial level. An exception to the prohibition applies where the transaction, order or behaviour was carried out for legitimate reasons and in accordance with an accepted market practice formally established by a national regulator. For an accepted market practice to be established, a national regulator must notify ESMA and national regulators of its intention and ESMA must issue an opinion (a) that assesses the compatibility of the AMP with MAR and the related regulatory technical standard on AMPs and (b) considers whether the AMP would threaten market confidence in the EU's financial market.

In 2016, ESMA received notifications from national regulators of their intention to establish AMPs for liquidity contracts where an issuer enters into an agreement with a financial intermediary that undertakes to enhance the liquidity of the issuer's financial instruments. ESMA issued the opinion on AMPs for liquidity contracts because it considers that it is beneficial for national regulators and market participants to develop a common approach.

This opinion sets out the qualifying criteria for liquidity contract AMPs. These criteria cover the financial instruments that are in scope, the form of contract, performance of liquidity contracts, the liquidity of instruments covered by the AMP, trading conditions and limits to the resources allocated to the performance of the liquidity contract.

View the opinion.