Market abuse

Regulation (EU) No. 596/2014 of 16 April 2014 on market abuse (Market Abuse Regulation, MAR) 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 was adopted by the EU legislature to adapt the previous market abuse regime to the technical developments in various markets and to enhance such regime by extending its scope of application, sharpening requirements for combating market abuse, strengthening the powers of supervisory authorities and introducing tougher sanctions for infringements.

The definition of the term “market abuse” originates from the MAR and Directive 2014/57/EU on criminal sanctions for market abuse (Market Abuse Directive, MAD II or CSMAD).

Market abuse may arise in circumstances where investors have been disadvantaged, directly or indirectly, by others who:

• have used information which is not publicly available (insider dealing);
• have distorted the price-setting mechanism of financial instruments or disseminated false or misleading information (market manipulation).

This type of conduct can undermine the general principle that all investors must be placed on an equal footing. The purpose of combating market abuse is to guarantee the integrity of financial markets and to increase investor confidence in them.

The European legislation is primarily concerned with strengthening the market integrity and creating transparency for the purposes of investor protection, and thereby strengthening the public confidence in the functioning of the securities markets.

The MAR’s main objectives are

1. adapting the market abuse legal framework to the rise of new kinds of trading platforms and technological developments such as high-frequency trading; for this purpose, among other things, the catalogue of financial instruments to which the market abuse provisions apply will be extended;
2. improving the monitoring of market manipulation in commodity derivatives markets and the manipulation of benchmarks (STOR; notification system for suspicious transactions and orders);
3. extending disclosure obligations for issuers; simplifying them for small and medium-sized enterprises (SMEs);
4. strengthening the powers of the supervisory authorities to monitor and intervene in the event of market abuse;
5. standardising and strengthening the sanctions available.

Market abuse is a concept that encompasses unlawful behaviour in the financial markets. It will continue to cover insider dealing, unlawful disclosure of inside information and market manipulation. Indicators of manipulative behaviour are described in Annex I of the MAR; the EU Commission will continue to refine them in a level II legal instrument.

The complete overhaul of the EU’s market abuse regulatory framework of MAR including all Level II Acts based on MAR entered into force in Liechtenstein on 1 January 2021. Besides according to Article 39 the MAR some provisions were transposed into national law, into the EEA-Market Abuse Implementation Act (LGBl. 2020 No 155) which also entered into force on 1. January 2021.